Private Capex Projects Surge in Q2: RBI Bulletin
Private sector capital expenditure projects sanctioned by banks and financial institutions surged significantly in the second quarter of FY26, indicating improved investment confidence among corporations, according to the Reserve Bank of India’s November bulletin.
Key Takeaways
- Private capex project costs surged in Q2FY26
- Power, construction, and infrastructure sectors led investments
- ECB and IPO fundraising for capex increased quarter-on-quarter
- Rural demand drove economic activity with strong vehicle sales
- Unemployment rate stabilized at 5.2%
Sectoral Investment Focus
The majority of intended investment was concentrated in power, construction, roads, and bridges sectors. Funds raised for capital expenditure through external commercial borrowings and initial public offerings also showed improvement compared to the previous quarter.
Despite fresh ECB registrations moderating during the first half of the current fiscal year, inflows continued to outpace outflows, resulting in net inflows of $8 billion. Notably, 45% of total ECBs registered during this period were allocated for capex purposes.
Economic Indicators Show Strength
India’s high-frequency indicators in October demonstrated robust activity in manufacturing and services, supported by festive demand and positive impacts from recent GST reforms. The bulletin highlighted that rural demand led this growth, with two-wheeler and tractor sales showing significant increases.
Urban economic indicators also strengthened, with passenger vehicle registrations reaching nine-month highs. The unemployment rate stabilized at 5.2%, showing particular improvement in rural areas, while PMI employment indices remained in expansionary territory.
RBI’s Economic Outlook
“The fiscal, monetary, and regulatory measures undertaken so far this year should pave the way for a virtuous cycle of higher private investment, productivity, and growth, leading to long-term economic resilience,” the RBI report noted in the article “State of the Economy.”
New Inflation Measurement Tool
The bulletin introduced multivariate core trend (MCT) inflation, a sophisticated measure of trend inflation that distinguishes between economy-wide price pressures and sector-specific movements. This new metric has demonstrated greater stability and smoother movements compared to traditional inflation measures, particularly during periods of significant supply shocks like the pandemic and global commodity price surges.
“Broad-based price pressures, rather than isolated sector movements, have been the key drivers of underlying inflation in recent years, with services inflation gaining importance,” the bulletin observed.
MCT inflation tracks persistent price pressures in the economy, looking beyond temporary fluctuations in food and fuel prices to focus on lasting inflation trends. This improved measurement enhances inflation forecasting capabilities over the medium term, providing policymakers with an additional analytical tool for monitoring inflation dynamics and supporting decision-making.
Regulatory Approach and Innovation
RBI Governor Sanjay Malhotra emphasized the central bank’s balanced approach to regulation in the monthly bulletin, stating that the RBI is encouraging financial innovation while maintaining its commitment to safeguarding systemic stability.
“We are trying to simplify regulations where possible while maintaining necessary safeguards, strengthening coordination with other regulators while respecting jurisdictional boundaries, and trying to enforce rules consistently while recognizing that circumstances sometimes warrant flexibility,” he wrote.
Malhotra noted that these regulatory tensions cannot be permanently resolved but must be continuously managed, reflecting the evolving nature of financial regulation in his article titled “Regulation by RBI: Some Reflections.”
