India’s private capital expenditure cycle is gaining traction as corporate and SME lending surges, according to Jefferies. Bank credit growth rose 18.1 per cent year-on-year in mid-September. Strong machinery imports and rising GST receipts showed that recent reforms are working. These signs point to a steady improvement in national investment activity.
The brokerage says bank credit growth is robust, rising 18.1% y-o-y in mid-September, with corporate lending, loans to micro, small and medium industrial enterprises recording particularly strong growth
India's long-awaited private sector capital expenditure cycle may finally be gaining traction, with strong corporate and small business lending alongside rising machinery imports pointing to an improvement in investment activity, according to a report by global brokerage firm Jefferies.
The brokerage said bank credit growth has remained robust, rising 18.1 per cent year-on-year in mid-September, with corporate lending and loans to micro, small and medium industrial enterprises recording particularly strong growth. Corporate loans increased 21.6 per cent year-on-year in August, while loans to micro, small and medium industrial enterprises rose 25.5 per cent, indicating strengthening credit demand across businesses.
Ease of doing business
Jefferies said the acceleration in lending to smaller enterprises could suggest that Goods and Services Tax (GST) and labour reforms introduced towards the end of last year, alongside measures to improve the ease of doing business, are beginning to yield results. Another indicator of a potential investment upturn is the rise in capital goods imports. Imports of machinery goods increased from $29 billion in FY21 to $62 billion in FY26 and $66 billion in the 12 months through August.
Data as evidence
The annualised gross fixed capital formation-to-GDP ratio also rose to 32.4 per cent in the four quarters through June, from 31.4 per cent in the four quarters through December, suggesting an improvement in investment activity.
The brokerage said India's economic performance had remained resilient despite geopolitical uncertainties and energy-related challenges, with domestic demand continuing to provide support. GST receipts grew 14.8 per cent year-on-year in August, while power demand growth accelerated to 9.4 per cent during April-August, compared with 1.8 per cent in January-March.
Residential real estate sales across the top seven cities also increased 7 per cent in the first eight months of the calendar year, against a 1 per cent decline in 2025. Jefferies expects nominal GDP growth of around 11-12 per cent in FY27, with improving nominal growth likely to support corporate earnings growth. It projects earnings growth to accelerate from 14 per cent in FY27 to 17 per cent in FY28.
The report also identified space, semiconductors, solar manufacturing, data centres, electronics and aerospace as six emerging industrial growth areas, supported by government incentives and growing private sector participation.