Conflict Tests Capex Momentum

West Asia Conflict Threatens To Stifle India’s Nascent Capex Cycle

By Amritha Pillay

What?

India’s private sector spending is seeing a revival. After a decade of stagnation, engineering and capital goods firms, which form the backbone of industrial expansion, are reporting a long-awaited increase in orders. 

But as this revival attempts to take off, it faces several challenges, including the war in West Asia and an uneven domestic consumption story.

If the conflict prolongs or worsens, this path may get bumpier depending on the cost of oil barrels and other inflationary pressures. 

How It’s Going 

The numbers show a structural shift. According to ICICI Securities, India Inc’s yearly capex for its listed universe made an impressive start in 2001, peaking at Rs 6 trillion in 2011. Then, for a decade, it plateaued at the same annual levels, only to breach the 2011 mark in 2023 and rising to touch Rs 12 trillion in the first six months of FY26 

India’s largest engineering firm, Larsen & Toubro (L&T), a bellwether for the Indian economy, exemplified this trend.

While sharing its latest quarterly performance, it highlighted a ‘meaningful’ rise in private sector orders, and added, “we are now slowly looking at a higher share of private sector prospects,” and expect private and public spending to keep up pace in the near term. 

 India’s real estate segment is one of the primary recipients of the rising private capex. 

Multiple engineering firms listed their real estate clients as one of the contributors to their private sector order books. For companies like Kalpataru Projects International, buildings and factories brought close to 60% of its new orders between April and December 2025.

Along with real estate, energy, particularly fossil fuel, is also keeping these firms busy. For instance, there is a renewed interest in adding thermal power capacity in India, which includes large investments from private players such as Adani Power. 

“For capital goods companies, government/ PSU orders still constitute a majority share,” Jitin Makkar, Senior Vice President and Group Head at ICRA Ratings told The Core. “However, recent trends show rising order book share from the private sector in the following segments – power equipment, data centres, real estate, and select segments of manufacturing (like defence, electronics manufacturing, and other PLI-supported segments).”

What Next? 

India’s private sector capex story can stand strengthened or weakened depending on how India’s consumer-facing sectors decide to spend on capacity expansions. 

Makkar from ICRA said, “While balance sheets are supportive (financial leverage is low and cash flows are generally growing well), investment decisions remain selective, given global uncertainty and uneven domestic demand recovery. As for the outlook, the private sector capex revival prospects remain circumspect and confidence driven.”

Another significant threat to this momentum is the volatile situation in West Asia

In a report released less than a fortnight back, those at CareEdge noted downside risks (to credit offtake growth) rise if the conflict becomes prolonged and crude prices remain above $100 per barrel. 

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2.97 Crore Units

That's how many vehicles India’s auto retail sector moved in FY26, closing the year at an all-time high with a 13.30% year-on-year growth. According to the Federation of Automobile Dealers Associations, five out of six vehicle categories set all-time annual records.

Context: The performance was charged by the GST 2.0 implementation in September, which unlocked affordability for the mass segment and triggered a demand surge that lasted well beyond the festive season. March 2026 alone saw 26.92 lakh units hit the road—the highest-ever March on record — marking a staggering 25.28% YoY jump.

Critical Moment: However, FY27 is opening on a "cautiously positive" note. While dealers view current disruptions as transitional hurdles rather than a structural shift, the broader operating environment is being clouded by the West Asia crisis.

No Stay Drama

The Supreme Court of India on Monday declined to grant an interim stay on Adani Enterprises Ltd’s Rs 14,543 crore resolution plans for bankrupt Jaiprakash Associates Ltd, dismissing a challenge by Vedanta Ltd. It asked Vedanta and others to present their case before the National Company Law Appellate Tribunal (NCLAT).

Origin: At the heart of the dispute is valuation under the insolvency and bankruptcy code. Vedanta argued lenders failed to maximise value through a fair process, claiming its Rs 12,505.85 crore bid had a higher net present value. It said Adani’s plan was about Rs 3,400 crore lower overall and Rs 500 crore lower on NPV, while also raising concerns over the lack of transparency and the opportunity to clarify its offer.

Next Steps: Lenders maintained that the process followed the IBC norms. The NCLAT will hear the matter on April 10. IBC norms refer specifically to the committee of creditors’ (CoC) process under the Insolvency and Bankruptcy Code, 2016 - covering evaluation of bids (including net present value), adherence to an approved resolution process, and the CoC’s commercial wisdom in selecting a plan.

Plugging The Gaps

India is racing to shore up supplies as the West Asia conflict deepens its economic footprint. Indian refiners, including IOC and BPCL, have postponed routine maintenance shutdowns to sustain domestic fuel output.

Flashpoint: On the food security front, India has issued a tender to import 2.5 million tonnes of urea ahead of the monsoon sowing season, with global urea prices surging as nearly 45% of world supplies transit through the Persian Gulf, Bloomberg reported.

At the diplomatic level, the US and Iran are reportedly weighing a framework to end the five-week conflict, though Tehran is resisting pressure to reopen the Strait of Hormuz. Brent crude eased to $108 on Monday amid cautious optimism around the talks.

Setting: Finance Minister Nirmala Sitharaman, meanwhile, described the conflict as a "systemic tremor" threatening global energy arteries, warning that FY27 will be significantly more challenging than anticipated, PTI reported.

War Hits IT Momentum

India’s services sector lost momentum in March as rising costs and geopolitical tensions weighed on demand. The HSBC India Services PMI fell to 57.5, a 14-month low, even as it remained firmly in expansion territory. Companies reported softer growth in new business, particularly in travel and tourism, amid uncertainty linked to the West Asia conflict.

Setting: At the same time, input costs surged at the fastest pace in nearly four years, driven by higher fuel and wage pressures. Firms raised prices, but not enough to fully offset the spike. “The moderation in growth was largely driven by softer domestic demand,” said Pranjul Bhandari.

Overview: The slowdown mirrors trends in manufacturing, where growth also moderated. Together, they pushed the composite PMI to its weakest level in nearly three years, signalling that India’s economic momentum is cooling, even as overall activity remains resilient.

Kitchen Budgets Hold Steady

The cost of preparing a vegetarian thali at home held steady at Rs 26.5 in March 2026, flat on-year, according to Crisil's monthly food plate cost indicator released on Monday.

Overview: The non-vegetarian thali fared slightly better, falling 1% on-year, as a 2% decline in broiler prices — which account for roughly half the cost — combined with softer onion, potato and pulse prices to ease the overall bill, even as elevated tomato prices limited the fall.

Setup: On a monthly basis, both thalis saw some relief — veg and non-veg costs declined 3% and 2% respectively in March, as tomato, potato and onion prices dipped on higher arrivals and subdued demand, with broiler prices also softening on lower non-veg consumption during Navratri.

AI Not Enough

India’s IT companies head into the March quarter with weakening momentum as global clients delay spending and hold back on large deals. Brokerages including Kotak Institutional Equities, ICICI Securities and Jefferies expect flat to low single-digit growth, with some firms likely reporting sequential declines.

Trigger: Companies continue to see steady demand for cost optimisation and efficiency-led projects, but discretionary tech spending remains muted across key sectors such as banking, retail and travel. Firms are ramping up investments in artificial intelligence, but AI-led deals remain small and have yet to offset the slowdown in core outsourcing revenues.

Projection: A weaker rupee may support margins, but it cannot fully cushion soft demand. Analysts expect cautious guidance, signalling that the slowdown could persist in the near term.

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Markets Rise on Monday Morning Peace Overtures

On Episode 839 of The Core Report, financial journalist Govindraj Ethiraj talks to C S Vigneshwar, President at FADA as well as Ashish Nanda, President and Head Digital Business of Kotak Securities. We also feature an excerpt from The Media Room interview hosted by Vanita Kohli-Khandekar and featuring Ashish Pherwani, Head of Media & Entertainment at EY.

• Markets rise on Monday morning peace overtures

• Electrification of vehicles is rising in India as March sales hit record

• Why India’s print industry continues to surprise, new findings

• How a higher STT on futures and options affect the industry