India's investment outlook strengthens as credit, exports rebound; inflation relief likely: HSBC

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New Delhi: India's investment outlook is strengthening as accelerating credit growth and rising corporate revenues point to stronger private capital spending, while a possible cooling of global energy prices could ease pressure on company margins, according to an HSBC report.

The report, titled "Why so down on India?" and dated November 6, said the economy's resilience warranted a reassessment of concerns surrounding higher energy costs and the impact of artificial intelligence on services exports.

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"Accelerating credit growth, for example, hints at stronger investment spending to come, including by private firms that have for years lagged in the capex cycle," the report said.

Funds flowing to the commercial sector increased to 6.6 per cent of GDP during April-September 2026 from 4.7 per cent a year earlier. Credit growth to larger companies, which typically undertake major capital expenditure projects, accelerated particularly strongly, while smaller businesses also increased borrowing.

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Corporate revenue growth moved above its trend over the past decade in both nominal and real terms, supporting the case for further investment despite rising interest rates.

HSBC said almost 70 per cent of around 100 growth indicators tracked by its India economics team signalled expansion in the latest quarter, compared with just under 55 per cent in the second quarter.

The report also pointed to scope for foreign direct investment to recover, supported by continued growth, reforms and expanding data centre investment.

"But there are reasons to be optimistic about net FDI drifting higher again: continued growth and reforms in India are bound to lure companies back again," it said.

However, data centre investment could temporarily increase imports of expensive equipment, the report noted.

On the external front, rising services exports helped cushion the economy against the oil price shock, keeping the current account deficit narrow and steady. A recent acceleration in goods exports, despite largely stalled global trade in non-AI goods, suggested India was gradually gaining market share.

Government infrastructure spending remained another support, with central capital expenditure exceeding 3 per cent of GDP annually, compared with less than 2 per cent before COVID-19.

HSBC nevertheless flagged weak rural demand following rainfall shortages and repeated heatwaves, alongside inflation pressures hurting households and squeezing corporate margins.

"In fact, a cooling of global energy prices in the coming months could offer considerable relief," the report said.

Its India economics team also expected consumer price inflation to stabilise, although a quick reversal was not assured.

The report, titled "Why so down on India?" and dated November 6, said the economy's resilience warranted a reassessment of concerns surrounding higher energy costs and the impact of artificial intelligence on services exports.

"Accelerating credit growth, for example, hints at stronger investment spending to come, including by private firms that have for years lagged in the capex cycle," the report said.

Funds flowing to the commercial sector increased to 6.6 per cent of GDP during April-September 2026 from 4.7 per cent a year earlier. Credit growth to larger companies, which typically undertake major capital expenditure projects, accelerated particularly strongly, while smaller businesses also increased borrowing.

Corporate revenue growth moved above its trend over the past decade in both nominal and real terms, supporting the case for further investment despite rising interest rates.

HSBC said almost 70 per cent of around 100 growth indicators tracked by its India economics team signalled expansion in the latest quarter, compared with just under 55 per cent in the second quarter.

The report also pointed to scope for foreign direct investment to recover, supported by continued growth, reforms and expanding data centre investment.

"But there are reasons to be optimistic about net FDI drifting higher again: continued growth and reforms in India are bound to lure companies back again," it said.

However, data centre investment could temporarily increase imports of expensive equipment, the report noted.

On the external front, rising services exports helped cushion the economy against the oil price shock, keeping the current account deficit narrow and steady. A recent acceleration in goods exports, despite largely stalled global trade in non-AI goods, suggested India was gradually gaining market share.

Government infrastructure spending remained another support, with central capital expenditure exceeding 3 per cent of GDP annually, compared with less than 2 per cent before COVID-19.

HSBC nevertheless flagged weak rural demand following rainfall shortages and repeated heatwaves, alongside inflation pressures hurting households and squeezing corporate margins.

"In fact, a cooling of global energy prices in the coming months could offer considerable relief," the report said.

Its India economics team also expected consumer price inflation to stabilise, although a quick reversal was not assured.