Key Economic Developments in India (2025)

1. Robust GDP Growth

In the first half of the fiscal year 2025, India experienced strong GDP growth with 7.4% in the first quarter and 8.2% in the second quarter, surpassing expectations.

2. Inflation Trends

• Retail inflation reached a low of 0.3% in October, the lowest since 2012.
• Excluding gold, headline inflation was in the negative.

3. Impact of US Tariffs

• High US tariffs had a muted impact on global and Indian economies.
• The IMF revised global growth up by 40 basis points to 3.2% for 2025.

4. Revised Forecasts

• India's GDP growth forecast increased by 50 basis points to 7%.
• Inflation is expected to average 2.5%.

5. Global Economic Trends

• AI investments, particularly in the US, drove optimism and exports of high-tech goods.
• WTO revised world trade volume growth for 2025 to 2.4% from 0.9%.

6. Capital Inflows and Currency

• Volatility in capital inflows and depreciation of the rupee were noted.
• Net foreign investments in equities were negative; foreign direct investment (FDI) remained subdued.

7. Domestic Economic Factors

• Favourable monsoons and low crude oil prices supported growth.
• Government policies, including capex and GST rationalization, boosted growth.

8. Monetary Policy

• The RBI cut the repo rate by 125 bps and the cash reserve ratio by 100 bps in 2025.
• Monetary policy aims to support the economy with a lag in effect.

9. Future Economic Outlook

• GDP growth is expected at 6.7% with 5% inflation for fiscal 2027 due to a low base effect.
• Private corporate capex is expected to rise, especially in emerging sectors like data centers.
• Government reforms aim to enhance the business climate and attract foreign capital inflows.

10. Trade and Investment Prospects

• Potential trade agreements with the US could reduce uncertainty and boost confidence.
• Global tech majors plan substantial investments in India's tech ecosystem.