While India boasts the world’s largest working-age population—over 600 million strong—its transformation into a global manufacturing powerhouse remains stuck in second gear. Policymakers hope to leverage the country’s demographic dividend to emerge as a major player amid the ongoing US-China trade and tech wars. But the real question remains: Where is the investment?
Despite big headlines and grand promises, a closer look at the ground realities reveals a different story. Private sector investment—the fuel that should be powering India’s industrial engine—is at a worrying three-year low. The banking system, flush with liquidity thanks to the Reserve Bank of India’s (RBI) aggressive policy stance, is still not seeing enough demand for long-term credit, especially in sectors that once drove the economy.
RBI’s Bold Moves Meet Tepid Response
Since taking charge, RBI Governor Sanjay Malhotra has tried nearly everything in the playbook to rekindle investor sentiment. Within six months, he cut the benchmark interest rate by a full percentage point, bringing it down to 5.5%. He opened the monetary floodgates and even relaxed lending norms for small borrowers and those seeking gold-backed loans.
But while mortgage buyers and small borrowers might benefit at the margins, the real test lies in reviving corporate confidence. And there, the response has been muted. As a stopgap, the RBI recently mandated banks to provision between 1% and 1.25% of their exposure to unfinished projects—down from a much more stringent proposal last year. It’s a compromise, aimed at balancing risk while still encouraging lending to infrastructure and long-gestation projects.
But it still doesn’t answer the most pressing issue: Why aren’t India’s industrialists and mid-sized businesses borrowing to build new assets?
Where Are the Tycoons?
For India’s economic momentum to shift gears, its business tycoons need to lead the charge with aggressive capital expenditure. But the usual heavyweights are either distracted or dealing with complications.
- Gautam Adani, despite facing a US indictment for alleged corruption, is still bullish. His group is committed to spending $15–20 billion annually over the next five years on ports, logistics, green energy, and other strategic sectors.
- Mukesh Ambani is in the midst of restructuring Reliance Industries, trying to unlock value by spinning off its digital and retail arms in the stock market. Expansion plans are on the back burner until this is done.
- Tata Group is entangled in managing Air India, especially after the airline was linked to India’s worst aviation disaster in 30 years. The fallout is diverting attention and capital from other projects.
- Sajjan Jindal, chairman of JSW Steel, is stuck in legal battles after the Supreme Court annulled his $2.7 billion acquisition of a bankrupt steel firm—four years after the deal was sealed. That unit now contributes 13% to his total revenue, making the setback more than just symbolic.
Small Players Are Still Cautious
Smaller firms, too, aren’t showing the enthusiasm that India’s growth story demands. Many of them are still carrying the scars of the last decade’s bad-loan crisis. As a result, their appetite for fresh credit remains subdued.
Even construction and engineering firms, which serve as a proxy for new asset creation, are showing signs of a slowdown. According to India Ratings, the government’s target for new road construction this fiscal year is the lowest since 2018. Contractors are facing tighter margins and delayed payments in sectors like irrigation and water supply. With their working capital locked up, they are wary of taking on new debt.
Global Jitters and Policy Uncertainty
The global outlook isn’t helping either. As of now, Indian exporters are anxiously waiting for July 9, when the Trump administration in the US is set to revisit tariff rules. Unless India can clinch a last-minute trade deal with Washington, Indian goods could face a 26% duty hike in their biggest market.
That uncertainty is keeping corporate India from pushing ahead with ambitious expansion plans. As one banker in Mumbai put it, “There are more calls about refinancing and restructuring than requests for fresh project loans.”
What Lies Ahead?
It’s not that India lacks opportunity. In fact, S&P Global Ratings recently projected a $800 billion investment boom by Indian conglomerates over the next decade. Much of this will be driven by futuristic sectors like green hydrogen, semiconductors, clean energy, aviation, EVs, and data centers. But for that to materialize, corporate houses must feel confident about returns—and policymakers must work harder to de-risk investment environments.
India’s banks, flush with funds, are waiting. Global private equity players and sovereign wealth funds are circling Indian assets, ready to invest. What’s missing is the spark of confidence, the animal spirits that economists love to talk about.
India may have the manpower and macroeconomic stability to become the world’s next manufacturing hub, but without a revival in private investment, the dream will remain just that—a dream.
As of now, the wheels of progress are turning, but slowly. The RBI has done its part with liquidity and rate cuts. Now, it’s time for industry leaders to step up, for bureaucrats to clear red tape, and for global stability to return. Only then can India truly transition from being a sleeping giant to the factory of the world.
