India’s Growth In 2026 Likely Driven By Consumption, Investment Remains Weak: Nuvama Report

New Delhi, Jan 5 (KNN) Household consumption in India is likely to continue outpacing capital expenditure (capex) in 2026, supported by a fiscal policy tilt towards consumption and a revival in credit, even as corporate investment sentiment remains cautious, according to a report by Nuvama.

Drivers of Consumption Growth

The report attributes consumption’s relative resilience compared with capital expenditure to three factors: during slower economic growth, consumption tends to hold up better than investment; fiscal policies are increasingly geared toward supporting consumption, aided by improving credit availability; and while overall income growth remains modest, demand from lower- and middle-income households is expected to remain stronger than that from higher-income groups, reported ANI.

Despite subdued income growth and a moderated wealth effect, consumption in FY26 is expected to be sustained primarily by leverage and government transfers rather than a broad-based improvement in household incomes. 

Recent state-level schemes, particularly women-focused direct benefit transfers, are providing additional support to lower-income consumption.

Capex to Remain Subdued

Investment activity is likely to remain restrained through 2026. Limited fiscal space is expected to constrain public capex, while large corporations are cautious amid weak revenues and profitability. 

Household-led capex is also moderating, with high-end and premium real estate entering a soft patch. The combination of these factors is expected to keep capex growth slow.

Twin Engines of Growth

Consumption and capex remain India’s twin engines of growth: household spending drives demand, while investment expands supply capacity, generates employment, and supports income growth. 

In 2026, the report suggests that demand strength will be concentrated in lower- and middle-income segments, whereas investment activity will remain restrained due to fiscal limits and cautious corporate sentiment.

(KNN Bureau)