India's capital goods industry is on track to post 12–14 per cent revenue growth in fiscal 2026, according to a Crisil Ratings report released on Friday, 22 May. The projected expansion is underpinned by sustained government capital expenditure, steady capacity build-out across power, mining, oil and gas, metals, and auto-linked sectors, and rising demand from emerging segments including data centres and electric vehicle (EV) infrastructure.

Order Books at Record Levels

Order books at large capital goods companies have grown 1.5 times over the past two fiscals, reaching ₹5.2 lakh crore as of December 2025. The book-to-bill ratio has improved to 3.7 times in fiscal 2026, up from 3.1 times in fiscal 2024 — a signal of strong revenue visibility for the sector in the near term.

Power Sector Leads Capex Push

Power sector capital expenditure now accounts for 50 per cent of the industry's order mix, up sharply from 32 per cent in earlier periods. Crisil expects power capacity additions of 58–62 gigawatt (GW) this fiscal, led by renewables, to drive demand for heavy engineering and equipment. Transmission capex is also forecast to remain robust, supported by renewable energy integration, rising electricity demand, and grid modernisation programmes.

Aditya Jhaver, Director at Crisil Ratings, said: 'We expect capital goods companies to report revenue growth of 12-14 per cent this fiscal, driven by strong double-digit growth in capex spends across the power sector, particularly the renewable energy value chain. Growth is further supported by increased government spending in key sectors such as railways and defence, where capex allocations this fiscal have risen 11 per cent and 5 per cent, respectively.'

Railways, Defence and Private Capex

Railway capital expenditure is set to recover on the back of network expansion and modernisation initiatives, while defence spending continues its upward trajectory with a focus on indigenisation. Private sector capex in core industries — steel, cement, and oil and gas — remains steady, driven by domestic demand, even as newer verticals such as data centres and EV infrastructure gain incremental traction.

Margins and Geopolitical Cushion

Operating margins are expected to stay range-bound at 12–13 per cent this fiscal, supported by strong project execution, long-term client relationships, and improved operating leverage, despite some geopolitical cost pressures. Notably, the ongoing developments in West Asia are unlikely to materially affect the sector, as diversified order books and limited regional exposure to the Middle East provide a buffer — with revenue largely accruing from the domestic market, the report noted.

With order visibility high and government capex pipelines intact, the capital goods sector appears well-positioned to sustain its growth momentum through the remainder of fiscal 2026.