Central Capex To Surge By 25% YOY In Second Half Of 2025: Jefferies Report

The central government’s capital expenditure is expected to rise by 25% year-on-year (YoY) in the second half of the financial year 2025, according to a report by Jeeries. The report also predicts a 15% increase in overall government expenditure. Despite the rise in populist schemes ahead of elections, the government remains focused on infrastructure development over welfare measures.

Jeeries’ report highlights a balanced approach in the government’s spending priorities. It notes that while populist policies are gaining traction, particularly in state elections, the central government continues to prioritize long-term economic growth through infrastructure investment.

The report states, “Jeeries’ India Voice expects total central government expenditure to rise by around 15% YoY in 2HFY25, with capex increasing by over 25% YoY. Despite the rise in populist policies, the central government is still spending more on capex than on welfare.”

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The report also raises concerns about the growing influence of handout schemes in state elections. For example, Maharashtra’s welfare program, costing Rs 460 billion annually (1.1% of the state’s GDP), reflects the rising trend of populism. It further points out that 14 of India’s 28 states have similar schemes, covering around 120 million households and costing 0.7-0.8% of India’s GDP.

However, the central government’s focus remains on building long-term infrastructure assets, which are crucial for sustained economic growth.

In the financial markets, the report suggests that the Indian stock market may be stabilizing after a recent correction, particularly in the mid-cap segment. Despite foreign investors selling over USD 12.5 billion in Indian equities in the last two months, domestic investors have absorbed much of the outflow. October saw record inflows into equity mutual funds, even as the stock market corrected.

The report concludes that strong domestic inflows and government capex spending provide a stable outlook for India’s financial markets, despite concerns over rising populism at the state level.