India Budget: India plans record infrastructure spending in 2025-26 (updated)

BEML

01/02/2025 07:39

(Updates with details, market reaction and analyst quotes)
       MUMBAI, Feb 1 (Reuters) - India's federal government
will spend a record 11.21 trillion rupees ($129.54 billion) on
infrastructure in the upcoming financial year that begins on
April 1, but the increase in planned spending disappointed
markets.
    The spending plan is slightly higher than the revised 10.18
trillion rupees for the current fiscal year, as per budget
documents.
    Alongside this, the government has set aside 1.5 trillion
rupees for 50-year interest-free loans to states for
infrastructure development for 2025-26.
    
    WHY IT'S IMPORTANT
    India significantly raised spending on infrastructure after
the COVID-19 pandemic, as it tried to boost economic growth and
create more jobs in the world's most populous country.
    However, the government failed to meet its planned capital
spending target of 11.11 trillion rupees in the current
financial year.
    Growth in Asia's third-largest economy is seen slowing to
6.4% in the current fiscal year, from 8.2% in the previous year,
prompting calls for measures to kick-start private investment
and job creation.
    A failure to create enough well-paying jobs in a country of
more than 1.4 billion people, where the majority are under the
age of 30, has led to curtailed consumption and investment.


    GRAPHIC      

    KEY QUOTES
    "The next year's capex target has seen 10% increase, which
will be positive for crowding in private investments," said
Sonal Badhan, economist at Bank of Baroda.
    "We believe that ~10% growth in capex budget from downward
my revised FY25 levels while balancing focus on the fiscal
consolidation roadmap is a positive," said Kanika Pasricha,
economist at Union Bank of India.
    "More importantly, demand stimulus via tax cuts is likely to
further help support pickup in private capex recovery even as
public capex is hitting absorptive capacity in recent years,"
Pasricha said. 

    MARKET REACTION
    Stocks of capital goods companies such as Larsen & Toubro
 LART.NS  declined 4%, while Siemens  SIEM.NS  and BEML
 BEML.NS  fell 5.3% and 1.3% respectively.

    
($1 = 86.5360 Indian rupees)

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India federal government's infrastructure spending over the
years    https://reut.rs/3QfROLP
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 (Reporting by Siddhi Nayak; Editing by Varun H K)
 ((Siddhi.Nayak@thomsonreuters.com; +91 22 6921 7848; Reuters
Messaging: X: https://twitter.com/siddhiVnayak))