Q2 slowdown hit India Inc.’s Q3 investments

With domestic demand seen waning amid a spike in inflation and input costs, investment plans by India’s private sector took a notable hit, falling 1.4% in the October-December 2024 quarter (Q3) after a fleeting recovery in the second quarter (Q2) of 2024-25.

With domestic demand seen waning amid a spike in inflation and input costs, investment plans by India’s private sector took a notable hit, falling 1.4% in the October-December 2024 quarter (Q3) after a fleeting recovery in the second quarter (Q2) of 2024-25.

However, government capex plans registered a sharp growth, lifting overall fresh investments in the economy by 9.9% in Q3 to ₹11.46 lakh crore from an updated tally of ₹10.43 lakh crore recorded in Q2. This rise was led by a 34.6% spike in fresh investments by State governments over Q2 levels, almost thrice the 11.8% growth in new outlays announced by the Union government.

New investments by foreign players rose 44.2% sequentially, albeit from a low base, to ₹1.02 lakh crore. This spike to largely thanks to a single ₹70,000 crore steel project announced by Arcelor Mittal Nippon.

Domestic investors, however, pulled back fresh investment plans by 1.4% from Q2 to nearly ₹6.11 lakh crore in Q3. Moreover, total private sector projects slipped sharply from 1,253 in Q2 to 1,061 in Q3. Private investors’ share in new investment projects dropped to 62.2% in Q3 from 66.2% in Q2, as per data from Projects Today, a firm that has been tracking new and ongoing investment projects in the country since 2000.

“The slowdown in domestic private investments during the third quarter of FY2025 reflects the apprehensions of India Inc. over rising input costs, driven by high inflation and ongoing geopolitical uncertainties,” Shashikant Hegde, director and CEO of Projects Today, told The Hindu. He added that weak corporate results and flagging urban demand in Q2 may have also dimmed investor appetite. India’s GDP growth had slowed to a seven-quarter low of 5.4% in Q2.

“The outlook for 2025-2026 remains optimistic, as favourable economic conditions like easing inflation, and the execution of policy interventions to spur consumption and growth, are expected to stimulate private investment activity,” Mr. Hegde reckoned, even as he mooted a continued government capex push in core sectors.

At almost ₹2.28 lakh crore, new investments by States surpassed the Centre’s ₹2.05 lakh crore announcements in Q3, and accounted for almost 20% of all new outlays. In Q2, the value of new projects announced by the Centre was higher than the States.