This study examines the relationship between private investment activity and macroeconomic uncertainty in an emerging market setting. We propose novel policy-specific uncertainty indices based on internet searches to capture uncertainty associated with monetary and fiscal policy in India. Using these indices in a sign-restricted vector autoregression (SRVAR) framework, we show that an unanticipated increase in uncertainty results in lower fixed capital formation at the aggregate level. Exploiting firm-level panel data, we further show that firms are compelled to scale back their capital expenditure when facing higher uncertainty. We also test channels through which uncertainty might affect private corporate investment. Our results suggest that the transmission happens mainly through the real-options channel that prompts firms to adopt a ‘wait-and-see’ approach before undertaking investments during times of heightened uncertainty.