Jefferies Forecasts Potential Market Disappointment as India’s FY25 Budget Indicates Slower Capital Expenditure Growth

Jefferies’ note suggests that India’s FY25 budget could exhibit a reduced growth in capital expenditure compared to previous years, potentially causing market disappointment.

Key Highlights

• Jefferies, a global financial services firm, foresees a diminished growth in capital expenditure in India’s FY25 budget compared to previous years, potentially resulting in reduced allocations for infrastructure development, public projects, and sector investments.

• The noted slowdown in capex growth is perceived as a potential market “disappointment,” with investors reacting negatively due to their expectations for ongoing infrastructural and economic expansion.

• Possible reasons for this deceleration include fiscal consolidation pressures, where the government may prioritize reducing the budget deficit, necessitating adjustments in spending priorities.

• Global economic uncertainties could also play a role, prompting the government to exercise caution in public spending to navigate external challenges.

• Additionally, domestic priorities such as increased emphasis on social welfare programs or subsidies might compete for a larger share of the budget, contributing to the slower growth in capital expenditure.