Sovrenn Times: Macroeconomy Update | 1 Sep 2025

Private Sector Capex to Surge 21.5% to ₹2.67 Lakh Cr in FY26, Driven by Infra & Lower Rates: RBI

Private corporate investment is projected to rise 21.5% YoY to ₹2.67 lakh crore in FY26, up from ₹2.20 lakh crore in FY25, according to an RBI bulletin article. The surge is attributed to healthier balance sheets, higher cash buffers, stronger profitability, diversified funding access, and supportive macro fundamentals. Key drivers include a 100-bps policy rate cut, sustained disinflation, easy liquidity, and rising capacity utilisation. The infrastructure sector, led by power, remains the largest magnet for fresh investments, dominated by greenfield projects that signal both cyclical recovery and structural capacity building.The article, authored by RBI’s Department of Statistics & Information Management, cautions that geopolitical tensions, global demand slowdown, and external risks could temper momentum. However, India’s domestic fundamentals remain robust. Execution of pipeline projects and continued policy push for infrastructure and project monitoring will be critical for translating intentions into durable growth.

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Shrimp Exports Face 15–18% Fall as US Tariffs Hit 58%

India’s shrimp exports are projected to drop 15–18% in FY26, with revenues declining 18–20% YoY, after the US hiked total import duty to 58.26%. The US, which accounted for 48% of India’s $5 Bn shrimp exports in FY25, now poses a major challenge as rivals like Ecuador and Vietnam face much lower tariffs. Exporters cannot pass on higher costs, leading to a 150–200 bps margin contraction and profitability plunging to a decade-low of 5–5.5%. An analysis of 63 exporters covering 55% of industry revenues shows weaker debt protection and stressed credit profiles. The sharp duty burden has also hit premium value-added shrimp sales, reducing capacity utilisation. While exporters explore alternative markets and product mix shifts, near-term competitiveness in the US remains heavily eroded.

Govt Notifies Rules for 100% FDI in Insurance, Awaits Parliament Nod

The finance ministry has notified draft rules paving the way for 100% foreign direct investment (FDI) in Indian insurance companies, replacing the current 74% cap with “as stipulated by the Insurance Act, 1938.” Once Parliament passes the Insurance Laws (Amendment) Bill, foreign investment will be permitted under the automatic route, subject to verification by the IRDAI. The February 2025 Budget had announced the move, clarifying that the enhanced FDI cap will apply only to insurers investing their entire premium collections within India. The bill also proposes composite licences and permitting foreigners as key managerial personnel (KMPs). Finance Minister Nirmala Sitharaman said the reform would unlock the sector’s full potential, improve penetration, and support the industry’s projected 7.1% annual growth rate over the next five years, ahead of global peers.

NHAI Rolls Out India’s First Barrier-Free MLFF Tolling System in Gujarat

The National Highways Authority of India (NHAI) has launched India’s first Multi-Lane Free Flow (MLFF) tolling system at Choryasi Fee Plaza, Gujarat (NH-48), with another site set to open at Gharaunda Plaza, Haryana (NH-44) under a partnership with ICICI Bank. Part of a mega plan to deploy MLFF at 25 toll plazas in FY26, the system uses FASTag, RFID readers, and ANPR cameras to enable toll deduction without stopping vehicles. This move promises reduced congestion, faster travel, improved fuel efficiency, and lower emissions, while also ensuring more accurate toll revenue collection. The barrier-free tolling initiative marks a major step toward building a smarter, more efficient highway network across India.

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India’s Fiscal Deficit Widens to 29.9% of FY26 Target on Front-Loaded Capex

India’s fiscal deficit touched ₹4.68 lakh crore (29.9% of FY26 target) by July, sharply higher than 17.2% a year ago, driven by front-loaded spending and weaker tax collections. Revenue expenditure rose 17.1% YoY to ₹12.17 lakh crore, while capital outlay surged 32.8% to ₹3.47 lakh crore, underscoring the Centre’s push for high-multiplier growth investments. Net tax revenue fell 7.5% to ₹6.62 lakh crore, dragged by lower personal income tax inflows in July, but non-tax revenue jumped 33.7% to ₹4.04 lakh crore thanks to the RBI’s record ₹2.69 lakh crore dividend transfer. In July alone, the deficit was ₹1.88 lakh crore with tax receipts dropping 26.6%. Analysts expect moderation in expenditure to help meet the 4.4% fiscal deficit-to-GDP target, though pending GST reforms may affect fiscal leeway, currently pegged at ₹50,000 crore by ICRA.