02-07-2025
June turns quieter as animal spirits fade
Indian companies began 2025-26 on a subdued note, with investment appetite for new projects sinking to one of the lowest in nearly five years.
While the June quarter is often a quieter period, new government capital expenditure (capex) announcements were the lowest this year in at least a decade.
According to data from the Centre for Monitoring Indian Economy's (CMIE) project-tracking database, new projects worth ₹4.1 trillion were announced across the country during the first quarter of the current fiscal. This marks one of the lowest investment proposals since the first three quarters of 2020-21 (amid pandemic lockdowns) and the first quarter of 2024-25 (during general elections).
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'There is usually a seasonal dip observed in project announcements in the June quarter after the ramp-up in March. But this year the decline was unusually sharp," said Aditi Nayar, chief economist at Icra Ltd.
A sharp decline in government projects, accounting for only 13% of overall new investments, primarily drove the slowdown in the recently concluded June quarter. Government investments totalled a mere ₹0.5 trillion, marking the lowest for a June quarter in at least a decade. This figure was even lower than public sector projects announced during April-June 2020, when the country had undergone an unprecedented lockdown due to the Covid-19 pandemic.
According to Icra's Nayar, the notable decline in Q1FY26's new projects should be read carefully, as it follows the unusual spike in Q4FY25 of worth ₹6.8 trillion, which was more than double the year-ago levels and also exceeded the amounts seen in the rest of 2024-25 together.
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'The chunking up of such announcements in Q4FY25 is likely to have led to the lull in Q1FY26," she added.
Private sector investments, at ₹3.5 trillion, though accounting for the bulk of new project announcements in Q1FY26, still hit a four-quarter low. Among the 10 largest new project announcements in the June quarter—which collectively represented approximately 67% of total investments—only one was government-funded: the Chandrapura Ultra Supercritical Power Plant Expansion Project worth ₹0.2 trillion in Giridih, Jharkhand.
Vedanta's Dhenkalan Aluminium Smelter Project led new investments in Q1FY26 at ₹1.3 trillion, followed by InterGlobe's purchase of 30 more Airbus A350-900 aircraft valued at ₹0.4 trillion.
Sector-wise analysis reveals that manufacturing primarily dominated new investments in the quarter, accounting for more than half of all announcements, yet investments in this segment remained at a near two-year low.
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Despite the subdued pace of new investment announcements in Q1FY26, project completions showed relative strength, with projects worth ₹2 trillion completed during the quarter, marginally lower than projects worth ₹2.4 trillion completed in the previous quarter.
