Jefferies stresses that the responsibility now falls on the private sector to lead the next phase of India’s investment cycle. Mahesh Nandurkar, head of India research at Jefferies, noted that the groundwork for a broad-based investment recovery has already been laid during Prime Minister Narendra Modi’s second term. The government has been a key player in expanding infrastructure, and now it’s time for the private sector to step up and drive capital spending.

In addition to the private sector’s role, recent tax relief measures in the government’s budget are expected to provide a significant boost to domestic consumption. The income tax exemption threshold has been raised from Rs 7 lakh to Rs 12 lakh per annum, with tax rates for individuals earning above Rs 12 lakh also reduced. These changes are expected to positively impact around 35 million taxpayers, providing an average financial relief of Rs 30,000 per individual. This increase in disposable income is anticipated to support greater domestic consumption.

Jefferies also pointed to the government’s fiscal consolidation plan, which aims to reduce India’s debt-to-GDP ratio from 57% to 51% by FY31. The fiscal deficit target of 4.4% in FY26 is expected to decline further, reaching around 3.5-3.6% by FY31. These efforts are aligned with India’s broader goal of maintaining macroeconomic stability while fostering sustainable growth.

While the slowdown in public investment has raised concerns, Jefferies emphasizes that the future of India’s economic growth now depends on the private sector’s ability to take the reins and drive capital expenditure, ensuring the economy continues to progress on a positive trajectory.

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