The central government’s capital expenditure is expected to rise by an impressive 25 per cent year-on-year (YoY) in the second half of the financial year 2025, according to a report by Jefferies
The report also noted that the overall expenditure of the government is also expected to surge by 15 per cent. It highlights that despite an increase in populist schemes in the run-up to elections, the central government remains committed to investing in infrastructure development over welfare-driven measures.
The report underlined that while populist policies have gained traction, especially in state elections, the central government’s spending priorities show a balanced approach.

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It said “Jefferies’ India office expects total central government expenditure to rise by around 15% YoY in 2HFY25 ending 31 March 2025 with capex rising by over 25 per cent YoY.. Still the rise of such populist policies should be seen in the context of a central government which is still spending more on capex than welfare”. The report noted that the growing success of handout schemes in state elections, such as Maharashtra’s welfare programme costing Rs 460 billion annually (1.1 per cent of the state’s GDP), does raise concerns about a potential wave of populism.

The report analysis showed that 14 out of 28 Indian states already have similar schemes, covering approximately 120 million households and costing a combined 0.7-0.8 per cent of India’s GDP.
However, the central government’s focus remains on creating long-term economic assets through infrastructure development, which is vital for sustained growth.

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In the financial markets, the report suggested a reasonable chance that the Indian stock market is stabilizing after a recent correction, particularly in the mid-cap segment. It said, “Meanwhile, there is a reasonable possibility that the Indian stock market is bottoming out after a correction which has been primarily in the more expensive mid-cap stocks.” While foreign investors sold more than USD 12.5 billion worth of Indian equities in the last two months, a significant amount by historical standards–domestic investors have absorbed the outflows. Notably, October saw record inflows into equity mutual funds, even as the stock market was undergoing a correction.

The report emphasised that the strong domestic inflows are a reassuring factor for India’s markets. The combined effects of government capex spending and robust local investment suggest a stable outlook, even amid concerns over rising populist measures at the state level.