India may be entering a new phase of investment activity. For a long time, the country's economic growth was determined by consumption and services, and companies were cautious about spending on new equipment, factories, and production capacity after the global financial crisis.
However, the situation may be changing. Recent GDP data shows one of the strongest signals: Gross Fixed Capital Formation (GFCF), which reflects investments in assets such as infrastructure, buildings, and machinery, increased by 11.9% year-on-year in the first quarter of fiscal year 27, reaching the fastest pace in 13 quarters. The share of GFCF in nominal GDP rose from 31.4% to 34.3%, while India's real GDP grew by 7.8% in this quarter.
Another figure attracting investor attention is 13.1 lakh crore. According to CMIE data, announcements of new private sector projects grew by over 70% year-on-year and quarter-on-quarter in the first quarter of fiscal year 27. The largest contribution came from power sector projects, whose announcements grew by 398% compared to the previous quarter.
Against this backdrop, Abhay Lajdwala, Managing Director and Chief Investment Officer at India Lighthouse Canto, asserts in his September 21 'The Beam' edition that India might be starting its 'second investment boom' following the 2003–2008 cycle.
Three key drivers supporting India's investment cycle
Three parallel, capital-intensive investment trends underpinning India's investment cycle are Artificial Intelligence (AI) infrastructure, the transition to renewable energy, and the development of domestic defense manufacturing. These themes are structurally difficult to postpone. According to Lajdwala, cumulative projected spending on AI infrastructure could range from $100 to $150 billion, and on the energy transition by 2032—nearly $300 billion.
Lajdwala emphasizes that the most significant surprise in the Q1 FY27 GDP data was not only the exceeding of forecasts but also the pace of GFCF growth, which increased by 11.9% year-on-year, more than double the 5.8% pace the previous year, and is the fastest indicator in many years. Furthermore, the capital formation to nominal GDP ratio rose to 34.3% from 31.4%, and the gross domestic product in the manufacturing sector accelerated to 9.2% from 8.3%, outpacing the overall growth rate and increasing the share of manufacturing in the total volume after years of stagnation.
Despite skepticism regarding the sustainability of this momentum, Lajdwala does not share the consensus, insisting that India's private investment cycle has changed, and the structure of economic growth, and consequently corporate earnings, is shifting in a direction that should be highly significant for investors over the next five years.
Previously, India functioned as a consumption and service-oriented economy, especially after the 2008 global financial crisis, when corporate balance sheets remained deliberately conservative, and primary growth was driven by private final consumption and government transfers. Lajdwala added that according to the National Institute of Public Finance and Policy (NIPFP), India's capital expenditure multiplier is 2.45x compared to 0.98 for transfer payments and 0.99 for other government spending. As the share of capital formation in GDP growth increases, a return to an economic growth model with a higher multiplier is expected, and this is happening at a time when fundamental demand drivers look unusually resilient.
Importance of project data versus actual spending
One of the key arguments presented in 'The Beam' is the CMIE data on project announcements. In Q1 FY27, the volume of announced private sector projects reached 13.1 lakh crore, which is 70% higher both year-on-year and quarter-on-quarter. The main driver of growth was power sector projects, whose announcements increased by 398% compared to the previous quarter, and manufacturing sector announcements grew by 17.3%.
However, there is a critical caveat: project announcements are not equivalent to actual capital expenditure. If a company announces the construction of a factory worth 10,000 crore, it does not mean those funds have already been spent; project execution can take years, and it may be postponed, scaled down, or canceled. Therefore, investors should monitor the next stage of the chain: Announcements $ ightarrow$ Actual Spending $ ightarrow$ Orders $ ightarrow$ Revenue $ ightarrow$ Profit $ ightarrow$ Cash Flows.
Lajdwala believes that evidence is already appearing in company order books. He points to large order portfolios in infrastructure and capital goods manufacturing companies. For example, Larsen & Toubro reported an inflow of orders of about 4.36 lakh crore for FY26, and its order book as of March 2026 stood at 7.40 lakh crore. Kalpataru Projects International reported an order book of 66,607 crore as of June 2026, including 29,609 crore in its transmission and distribution business.
The significance is not that these companies' stocks must rise, but that their order books allow verification of the overall thesis on capital expenditure. If investments are truly accelerating, companies supplying equipment and infrastructure should eventually receive more orders.
Three engines of the current investment cycle
In Lajdwala's view, the current cycle is distinguished by not depending on a single sector. He highlights three main investment directions:
- AI Infrastructure
- Renewable Energy and Grid
- Defense Manufacturing and Export
Details on each area
1. Artificial Intelligence: The need for physical infrastructure for the next technological boom
Lajdwala's argument is that the next wave of AI investment will also require a massive amount of physical infrastructure. AI models operate in data centers that require electricity, cooling systems, electrical equipment, cables, conductors, transformers, and transmission infrastructure. Thus, the AI investment chain looks like this: AI demand $ ightarrow$ Data Centers $ ightarrow$ Electricity demand $ ightarrow$ Power generation $ ightarrow$ Transmission $ ightarrow$ Electrical equipment $ ightarrow$ Construction.
Lajdwala estimates that investments in AI infrastructure in India could reach $100–$150 billion over the next five years. The AI infrastructure boom could potentially benefit companies that are not similar to traditional tech firms, such as cable manufacturers, electrical equipment producers, or engineering companies.
2. Renewable Energy: The need for grid construction
The second part of Lajdwala's thesis relates to the energy transition. Although India is increasing renewable energy capacity, power generation is only part of the equation; the energy must also be transmitted where it is needed. This requires additional investment in transmission lines, substations, transformers, conductors, cables, and grid management systems.
The government roadmap to integrate 900 GW of non-fossil fuel capacity by 2035–2036 may require about 7.93 lakh crore in transmission capital expenditure. Instead of only looking at companies generating solar or wind energy, investors can focus on the infrastructure needed to move this electricity. Lajdwala emphasizes this infrastructural opportunity, estimating that the overall theme of investment in renewable energy and its associated grid could involve around $300 billion in capital expenditure by 2032.
Lajdwala notes that in states with high levels of renewable sources, such as Rajasthan and Gujarat, curtailment (energy generation that cannot be dispatched due to grid constraints) reaches 50–60% during peak hours. This imbalance is exacerbated by the fact that only about 12% of transmission projects implemented under competitive bidding have been completed on time, with median delays exceeding ten months, despite the acceleration of renewable energy capacity commissioning and growing electricity demand linked to AI. He estimates that capital expenditure in this area approaches $300 billion by 2032.
3. Defense: Transition from import to production
The third theme is defense manufacturing. There are already specific figures confirming the broader trend towards domestic production. India's defense manufacturing reached a record 1.78 lakh crore in FY26, which is 15.6% more than the previous year (1.54 lakh crore). The private sector contributed about 24% of production, or approximately 42,000 crore. Defense exports also reached a record 38,424 crore in FY26, up 62.66% from the previous year.
Lajdwala provides examples: Solar Industries, a producer of explosives rather than a traditional defense contractor, saw its defense revenue grow by 123% year-on-year, now accounting for over a quarter of its business compared to one-fifth the year before. Astra Microwave's order book effectively doubled thanks to a single radar contract from HAL. Bharat Forge, a manufacturer of forged products and auto components, disclosed a new defense order portfolio worth 11,196 crore.
Stripping away the market jargon, Lajdwala's argument is quite simple: India may transition from a consumption and service-driven economy to one where investment and manufacturing become much larger drivers of growth. He sees three forces—AI infrastructure, energy transition, and defense production—providing structural demand for investment. He believes that early signs are already visible in GDP investment data, private project announcements, and company order books.
Lajdwala concludes: 'As investors, we have waited for a revival of private capital expenditure for almost fifteen years. In this quarter, for the first time, the composition of GDP, the investment coefficient, credit data, and the order books of the country's leading manufacturing and infrastructure companies tell the same story simultaneously, and the markets driving this story—AI infrastructure, energy transition, and defense—are being built independently of the news cycle. We would not say this cycle is risk-free; the impact of El Niño on the rural population and the volatile geopolitical situation are real and current threats to sentiment in the short term, but we would call this the first super cycle of capital expenditure since 2003–2008, where countervailing forces are working in favor of India, not against it. India's Gross Fixed Capital Formation is entering a multi-year upward cycle, not a temporary rebound. It is time to adjust our portfolios accordingly.'
