The Union Budget 2025 does not indicate a shift in the government’s focus away from infrastructure spending, according to Neelkanth Mishra, Chief Economist at Axis Bank and Head of Global Research at Axis Capital.While tax cuts may provide a boost to consumption, he believes capex will continue to play a central role in economic growth, and a full-scale shift in portfolios towards consumption may not be warranted.Mishra dismissed concerns that the government is reducing its focus on capex. “We are hitting the limits on what the government can directly do in terms of capex. The guidance from the government was that we will maintain the capex to GDP percentage here onwards. The scope for us to do more is now gone. Therefore, they are experimenting with new models like the ₹1 lakh crore urban infrastructure fund through a competition mode,” he said.
On the consumption side, Mishra sees the tax cuts putting more money in the hands of taxpayers, benefiting discretionary spending on jewellery, cars, and two-wheelers.However, he cautioned against overestimating its impact. “One lakh crore, which is less than 0.3% of GDP, being shifted to tax cuts should not drive a change in portfolios,” he said.While some of this money will flow into consumption, he pointed out that it could also lead to increased savings or spending on big-ticket items like real estate, which in turn could support investment growth.Mishra also pushed back against the idea that investors should immediately shift from capex-linked sectors to consumption plays. “It would be quite myopic to just say, ‘Let’s buy all consumption stocks.’ There are many ways this money can be spent, including on housing, which can drive investment activity,” he noted.First Published: Feb 3, 2025 11:43 AM IST
