The government's capital expenditure to GDP ratio is still at its highest, according to Hiren Ved, director and chief investment officer of Alchemy Capital Management.
People have misunderstood, as everybody is assuming that capex figure has gone 10% up from revised estimates, he said.
What needs to be understood is that figure from April to December for this financial year, which is about Rs 6.8 lakh crore, is out there. It means in the last quarter of present financial year, the government will have to spend Rs 3.3 lakh crore. To that, if one adds Rs 11.2 lakh crore of next year, it gives a rough figure of Rs 14.6 lakh crore in the next 15 months. Taking it as a simple monthly run-rate, it comes to Rs 97,000 crore a month over the next 15 months including last January. This calculation assumes that they are going to spend according to budgeted number, Ved told NDTV Profit.
In the first nine months of financial year 2025, the run rate was about Rs 76,000 crore. Comparison between Rs 76,000 crore and Rs 97,000 crore shows a 20% jump without counting state and PSU capex, Ved said.
But what happens in the market is that people look at incremental moves. That move was in Rs 1 lakh crore consumption stimulus, while the headline rise in capex was only 10%. Most investors are taking this interpretation. People are looking at overall numbers and reacting, he said.
It's always the nature of the market to discount whatever is here and now, Ved said.
Discretionary Consumption To Go Up
The economy was working on one engine, which was government capital expenditure. Now, the government has taken steps to start the second engine of growth which is consumption. It's the right thing to do, Ved said.
India's capex had a cyclical slow down but consumption has been struggling now for years post pandemic. There was a dire need to boost it, he said.
The maximum momentum has been given to Rs 12–15 lakh per annum income bracket. People belonging to this earning bracket are slightly better off. But giving a boost to their income may not translate into growth in staple consumption. The money will move more into discretionary consumption like hotels and automobiles, according to Ved.
Consumption at the bottom end will largely depend on rural spending power. "The government has taken a lot of steps to see that some money flows into agricultural sector. This is a more balanced approach."
Post pandemic, all guns went blazing capex. Now, there's a rebalancing and letting other areas of the economies improve, Ved said.
Prefers Real Estate Sector
Ved prefers real estate sector because of the presumtive tax on rent on second property. With lower taxes, the affordability of EMIs should go up. Premium real estate should do very well. People may use some of the extra money from tax cuts for savings. It will move into capital markets, and real estate, he said.
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