India is experiencing a significant growth in capital spending, with capital spending in most sectors likely to continue momentum in the next two months, based on a latest report by international brokerage firm Jefferies.
Mahesh Nandurkar, Jefferies' research head and managing director, projects that growth in capital spending would continue to remain robust until February and March.
This move is consistent with the government's updated budget numbers, which indicate its resolve for infrastructure and manufacturing growth.
"These are on expected lines but the fact that it's happening, gives confidence," Nandurkar said.
But he warned that growth estimates for the coming fiscal year could witness a dip of about 10% if there is a revenue gap, which he feels is a possibility.
"A lot will depend on whether the government kind of upfronts the capex and if it continues," he added.
In January 2025, the central government's capital spending posted a whopping 51% year-over-year growth, which was a testament to its commitment to strengthening the nation's infrastructure. Railways and road construction are among the prime sectors that have witnessed dramatic improvements, with around 83-87% of the financial year 2025 revised estimates having already been spent.
Nandurkar highlighted the importance of a balanced approach, with the market still being wary of private capital spending.
Private capex is already taking place in sectors such as cement, steel, hospital and real estate," he said.
Also, the government's devotion to capital expenditure is reflected in its augmented fiscal transfers to states, which have increased by almost 60%. This added assistance is also likely to further speed up state-level infrastructure development, adding to economic growth.
Metal Sector Ready for Growth Despite Rising Prices
Jefferies also pointed to considerable growth opportunities in core sectors, most notably metals, which have been picking up good momentum.
The brokerage observed that the Asian steel spread is still 20% below its long-term mean, which could reflect potential scope for expansion. Also, Indian steel prices have risen 5% from their December lows, which indicates recovery in the industry.
Jefferies noted that the imposition of a safeguard duty on steel would give additional price support, eventually leading to better profit margins and metal company valuations.
With supportive market conditions and strengthening sector fundamentals, the metals sector is likely to continue its good run in the next few months, the report concluded.
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