India’s investment outlook is showing signs of improvement, supported by accelerating credit growth, stronger corporate revenues and a recovery in exports, according to a latest report by HSBC. The assessment points to improving conditions for private sector investment, with companies increasingly accessing funds to expand operations and undertake new capital expenditure.
The report, titled Why so down on India?, highlights that stronger lending to businesses could support a fresh investment cycle despite relatively higher interest rates. It also suggests that a potential decline in global energy prices could ease inflationary pressures, reduce input costs and improve corporate profit margins.
According to HSBC, funds flowing to India’s commercial sector increased to 6.6 per cent of gross domestic product during April-September 2026, compared with 4.7 per cent during the corresponding period last year. The increase indicates stronger financing activity and improving demand for business credit.
Credit growth among larger companies, which typically undertake major infrastructure and capital investment projects, has accelerated significantly. Smaller businesses have also increased borrowing, suggesting that the improvement in credit demand is extending across different segments of the corporate sector.
Corporate revenue growth has also moved above its average trend over the past decade in both nominal and real terms. HSBC noted that stronger business revenues could encourage companies to invest in additional capacity, modernise operations and pursue expansion plans, even as borrowing costs remain relatively elevated.
The report also pointed to improving economic momentum across several indicators. Nearly 70 per cent of approximately 100 economic growth indicators tracked by HSBC’s India economics team signalled expansion in the latest quarter, compared with just under 55 per cent in the second quarter.
This improvement suggests that economic activity is gaining broader support across different sectors, strengthening expectations of sustained private sector participation in India’s growth.
Foreign direct investment could also witness a recovery, supported by the country’s economic expansion, policy reforms and growing investment in emerging sectors. HSBC specifically highlighted increasing investments in data centres as a factor that could strengthen India’s appeal as an investment destination.
On the external trade front, India’s services exports have provided important support to the economy, helping offset the impact of elevated oil prices and keeping the current account deficit relatively stable.
An improvement in merchandise exports has also indicated that Indian businesses are gradually increasing their presence in international markets. Stronger export performance could further support manufacturing activity, employment generation and investment demand.
However, HSBC cautioned that certain challenges continue to affect the domestic economic environment. Weak rural demand, partly linked to rainfall shortages and repeated heatwaves, remains a concern for consumption growth.
Inflationary pressures have also affected household purchasing power and corporate profit margins, creating uncertainty around the strength of domestic demand.
The report expects consumer price inflation to stabilise, while a moderation in international energy prices could provide additional relief to businesses and households. Lower energy costs would help reduce production and transportation expenses, potentially supporting profitability and consumption.
Overall, HSBC’s assessment points to improving conditions for India’s investment cycle, with stronger business credit, rising corporate revenues and recovering exports providing important growth drivers. However, the sustainability of this momentum will depend on improvements in rural consumption, inflation management and the global economic environment.
