India’s next ₹100-lakh-cr investment boom? 3 sectors may drive capex cycle | Personal Finance
India may be entering a new investment phase. For years, the country’s growth story has been dominated by consumption and services. Companies, meanwhile, remained cautious about spending on new factories, machinery and capacity after the global financial crisis.
That equation may now be changing.
The latest GDP data provides one of the strongest signals yet. Gross fixed capital formation (GFCF), a measure of investment in fixed assets such as machinery, buildings and infrastructure, grew 11.9% year-on-year in Q1 FY27, the fastest pace in 13 quarters. Its share of nominal GDP climbed to 34.3% from 31.4% a year earlier. India’s real GDP grew 7.8% during the quarter.
There is another number catching investors’ attention: ₹13.1 lakh crore.
New private-sector project announcements jumped more than 70% year-on-year and sequentially in Q1 FY27 to ₹13.1 lakh crore, according to CMIE data. Power and electricity projects were the biggest driver, with new electricity project announcements rising 398% sequentially.
Against this backdrop, Abhay Laijawala, Managing Director and Chief Investment Officer–India, Lighthouse Canto, argues in his September 21 edition of The Beam that India may be entering its “second investment boom”, after the 2003-08 cycle.
AI infrastructure, the renewable energy transition, and defense indigenisation are three concurrent, manufacturing-intensive investment themes underpinning India’s capex cycle, each structurally difficult to postpone. Cumulative estimated spend stands at US$100-150 billion for AI infrastructure and close to US$300 billion for the energy transition through 2032, said Laijawala.
India’s Capital Formation Cycle: It is turning and it looks to be durable
“In the 1QFY27 GDP numbers that just came out, the surprise was not only the headline beat. The bigger surprise was the pace of growth in gross fixed capital formation, which rose 11.9 % year-on-year, more than double the 5.8 % pace of a year earlier and the fastest rate in many years. The ratio itself, capital formation measured against nominal GDP, rose to 34.3 percent from 31.4 percent, while manufacturing GVA accelerated to 9.2 percent from 8.3 percent, outpacing the headline growth rate and nudging the sector’s share of output higher after years in which manufacturing’s contribution to GDP had stagnated. We see considerable skepticism on the sustenance of this momentum. However, we stand against the consensus. We do not think this is a one-quarter statistical anomaly. We underscore our conviction that India’s private capex cycle has turned, and that the composition of Indian economic and as a corollary, corporate earnings growth is shifting in a direction that should matter a great deal to how we as investors think about the next five years,” said Laijawala.
India has spent most of the period since the 2008 global financial crisis as a consumption and services-led economy, with private final consumption and government transfers doing the heavy lifting while corporate balance sheets stayed deliberately conservative.
“According to data from the National Institute of Public Finance and Policy (NIPFP), India’s capital expenditure multiplier stands at 2.45x versus 0.98 for transfer payments and 0.99 for other revenue expenditure. As the share of capital formation in GDP growth increases, we will see a shift back towards the higher-multiplier model of economic growth and it is arriving
at a moment when the underlying demand drivers behind it look unusually durable,” he added.
The ₹13.1 lakh crore number is important — but it is not actual spending
One of the biggest pieces of evidence cited in The Beam is CMIE’s project-announcement data.
Private-sector project announcements reached ₹13.1 lakh crore in Q1 FY27, more than 70% higher both year-on-year and sequentially.
Power was the biggest contributor, with electricity project announcements increasing 398% quarter-on-quarter. Manufacturing announcements also increased 17.3%. But there is a crucial caveat. Project announcements are not the same as actual capex.
If a company announces a ₹10,000-crore factory, it does not mean ₹10,000 crore has already been spent. The project may take years to execute. It may also be delayed, scaled down or cancelled. So investors need to watch the next link in the chain:
Announcements → actual spending → orders → revenues → profits → cash flows.
Laijawala believes evidence is already appearing in company order books.
Laijawala points to large order books at infrastructure and capital-goods companies as evidence that the current capex story is moving beyond announcements.
For example, Larsen & Toubro reported FY26 order inflows of about ₹4.36 lakh crore, while its order book stood at ₹7.40 lakh crore at the end of March 2026.
Kalpataru Projects International reported an order book of ₹66,607 crore at the end of June 2026, including ₹29,609 crore in its transmission and distribution business.
The significance is not that these companies’ shares must rise. Rather, their order books provide a way of testing the broader capex thesis.
If investment is genuinely accelerating, companies supplying infrastructure and equipment should eventually see more orders.
So where does the money go? Laijawala sees three big engines
According to Laijawala, the current cycle is different because it is not dependent on one sector.
He identifies three major investment themes:
1. AI infrastructure
2. Renewable energy and the power grid
3. Defence manufacturing and exports
Here’s what each means.
1. AI: The next technology boom needs physical infrastructure
Laijawala’s argument is that the next AI investment wave will also require enormous amounts of physical infrastructure.
- AI models run in data centres.
- Data centres need electricity.
- They need cooling systems.
- They need electrical equipment, cables, conductors, transformers and transmission infrastructure.
So the AI investment chain looks something like this:
AI demand → data centres → electricity demand → power generation → transmission → electrical equipment → construction
Laijawala estimates that India’s AI infrastructure investment could reach $100-150 billion over the next five years.
AI infrastructure boom could potentially benefit companies that don’t look like conventional technology companies at all.
A cable manufacturer, power-equipment maker or engineering company could potentially benefit from rising data-centre investment.
2. Renewable energy: India needs to build the grid too
The second part of Laijawala’s thesis is the energy transition. India is adding renewable-energy capacity, but generating electricity is only one part of the equation. The power also has to be transmitted to where it is needed.
This means more investment in:
- Transmission lines
- Substations
- Transformers
- Conductors
- Cables
- Grid-management systems
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The government’s roadmap to integrate 900 GW of non-fossil-fuel capacity by 2035-36 could imply around ₹7.93 lakh crore of transmission capex.
Instead of looking only at companies generating solar or wind power, investors can also look at the infrastructure needed to move that electricity.
That is the infrastructure opportunity Laijawala is highlighting. He estimates that the broader renewable-energy and associated grid investment theme could involve around $300 billion of capex through 2032.
“India has already built enough solar and wind capacity that curtailment — power generated but not evacuated because the grid cannot carry it — is running at 50 to 60 percent during peak hours in high-renewable states like Rajasthan and Gujarat, according to ICRA. The mismatch is also widening with only about 12 percent of transmission projects under the competitive-
bidding model have been completed on schedule, with median delays running past ten months, even as renewable capacity additions accelerate and AI-linked electricity demand increases pressure on the grid. The estimated capex on this theme is close to US$300bn between now and 2032,” Laijawala said.
3. Defence: From importing equipment to manufacturing it
The third theme is defence manufacturing.
Here, there are already some hard numbers supporting the broader manufacturing story. India’s defence production reached a record ₹1.78 lakh crore in FY26, up 15.6% from ₹1.54 lakh crore a year earlier. The private sector accounted for about 24% of production, or roughly ₹42,000 crore. Defence exports also reached a record ₹38,424 crore in FY26, up 62.66% from the previous year.
Strip away the market jargon, and Laijawala’s argument is relatively simple.
India may be moving from an economy driven primarily by consumption and services towards one in which investment and manufacturing become much bigger growth engines.
He sees three forces — AI infrastructure, energy transition and defence manufacturing — providing structural demand for investment.
And he believes the early evidence is already visible in GDP investment data, private project announcements and corporate order books.
“As investors we have been awaiting a private capex revival for almost fifteen years now. This quarter, for he first time, the GDP composition, the investment ratio, the credit data and the order books of the country’s leading manufacturing and infrastructure companies are all telling the same story simultaneously, and the demand pools behind that story, AI infrastructure, energy transition and defense, are the kind that get built regardless of the news cycle. We will not say this cycle is risk-free, an El Nino- driven hit to rural incomes and a volatile geopolitical backdrop are real and current threats to near-term sentiment, but we would call it the first capex Supercycle since 2003-2008 and where the countervailing forces are working in India’s favour rather than against it. India’s gross domestic capital formation is entering a multi-year upcycle rather than a temporary rebound. It is time to pivot our portfolios appropriately,” said Laijawala.
