India’s capital goods sector is expected to maintain its double-digit growth trajectory this fiscal, supported by sustained government infrastructure spending, rising private sector investments and healthy order books, according to a report by Crisil Ratings.

The ratings agency on Friday projected revenue growth of 12-14% for the industry in FY27, broadly in line with the previous fiscal, even as geopolitical tensions and global trade uncertainties continue to pose risks.

The report said sectors such as power, mining, oil and gas, metals and automobiles will continue to drive demand for capital goods, while emerging areas including data centres and electric vehicle (EV) infrastructure are opening up fresh opportunities.

“The ongoing developments in West Asia are unlikely to materially impact growth as diversified order books and limited regional exposure to the Middle East provide a cushion, with revenue largely accruing from the domestic market,” the report noted.

Power sector spending to remain key growth driver

According to Crisil, the sector’s growth outlook is being largely powered by strong capital expenditure in the energy segment, especially renewable energy and transmission infrastructure.

“We expect capital goods companies to report revenue growth of 12-14% this fiscal, driven by strong double-digit growth in capex spends across the power sector, particularly the renewable energy value chain,” said Aditya Jhaver, Director, Crisil Ratings.

“Growth is further supported by increased government spending in key sectors such as railways and defence, where capex allocations this fiscal have risen 11% and 5%, respectively,” he added.

The report estimated power capacity additions of 58-62 gigawatts (GW) this fiscal, led largely by renewable energy projects, which is expected to boost demand for heavy engineering equipment and related infrastructure.

Transmission investments are also expected to remain robust due to grid modernisation, rising electricity demand and renewable energy integration.

Order books swell as balance sheets stay healthy

Crisil’s analysis of 66 rated companies, which together account for nearly half of the industry’s revenue, showed aggregate revenue of around ₹2.1 lakh crore in FY25.

The report highlighted that order books of large companies have expanded nearly 1.5 times over the past two fiscals to ₹5.2 lakh crore as of December 2025. The book-to-bill ratio improved to around 3.7 times in FY26 from 3.1 times in FY24, reflecting strong project inflows.

The power sector’s share in total orders rose sharply to 50% from 32%, while defence and railway projects also continued to contribute steadily.

Despite cost pressures arising from geopolitical uncertainties, operating margins are expected to remain stable at 12-13%, aided by strong execution capabilities, long-term client relationships and improved operating leverage.

“The overall credit outlook of the sector is expected to remain stable, supported by healthy revenue growth and strong balance sheets,” said Joanne Gonsalves, Associate Director, Crisil Ratings.

“This, along with moderate capex plans and low debt, should keep leverage metrics comfortable,” she added.

Crisil projected debt-to-Ebitda for rated capital goods companies at around 0.8 times and interest coverage ratio at nearly 11 times this fiscal.

The report, however, cautioned that any sharp rise in commodity or freight prices due to prolonged geopolitical tensions could delay investments by both private industry and the government, potentially affecting sector profitability and growth.