India’s investment activity slowed down in Q2 FY2026, partly attributable to seasonal disruptions amid abovenormal monsoons, as reflected in the deterioration in year-on-year (YoY) trends for 7 of the 11 investment-related indicators, as compared to Q1. Additionally, project completions weakened in Q2 compared to the previous quarter, although new proposals, particularly by the private sector, were surprisingly strong. The Government of India’s (GoI) capex growth moderated to 31% YoY in Q2 from 52% in Q1, while remaining robust, even as the capital outlay and net lending of 24 state governments remained flattish YoY in July-August 2025 (+23% in Q1 FY2026). The upfronting in the GoI’s capex implies that a ~15% YoY contraction is required in H2 to stay within the FY2026 Budget Estimate (BE), which may weigh on growth during this period, unless the allocation is raised.

• Majority of investment-related indicators worsened in Q2 FY2026: The YoY growth performance of 7 of the 11 investment-related indicators deteriorated in Q2 FY2026 compared to Q1 FY2026.
  
• Home sales rose by ~5% YoY in Q2 FY2026, after declining in previous four quarters: The area sold in the top seven cities rose by 5.3% YoY to 154.7 msf in Q2 FY2026, while trailing the Q1 FY2026 level by 1.0%, amid lower launches.

Source: NSO; CEIC; ICRA Research