Central Government Boosts Infrastructure Spending Amid Rising Populism

The central government plans a 25% YoY increase in capital expenditure in 2H FY25. Despite rising populist schemes, there's a commitment to infrastructure. Domestic investors are countering foreign equity outflows, suggesting market stability.

The central government is set to dramatically increase its capital expenditures by 25% year-on-year during the second half of the fiscal year 2025, reports Jefferies. Overall government spending is also expected to grow by 15% in the same period.

Jefferies highlights the central government's commitment to infrastructure development even as populist policies gain traction ahead of looming elections. While such schemes are prevalent at the state level, the federal government maintains a balanced fiscal approach focused on long-term economic robustness.

Though populist schemes like Maharashtra's welfare program raise flags, possibly ushering a populist wave, the central focus remains on infrastructure. The stabilization of Indian markets, despite foreign equity outflows, is supported by record domestic mutual fund inflows, signaling economic resilience.

(With inputs from agencies.)