What 2025 Holds for India’s Economy and Markets

India's Fiscal Deficit Overview :

• Fiscal deficit reached 99.2% of GDP during the pandemic, driven by government spending on healthcare, food distribution, and infrastructure.
• Balanced spending on immediate relief and long-term projects mitigated economic damage and fostered growth.
• Key reasons for India avoiding debt crises: domestic debt financing, strong financial markets, and economic growth outpacing borrowing costs.

Investment Outlook for 2025 :

• Predicted GDP growth for FY 2026: 6.3–7%. Public and credit growth slowing, but welfare schemes and corporate earnings remain positive.
• Corporate earnings outlook: Nifty50 earnings to grow by 7% in FY 2025 and accelerate in the following years.
• Sectors expected to perform well include banking, consumer goods, autos, and real estate.

Interest Rate Projections :

• Moderate rate cuts anticipated in FY 2025 due to inflation concerns, with government bond yields expected to stabilize between 6.5% and 6.75%.

Sectoral Insights :

• Financial, consumer, and auto sectors identified as key growth areas.
• Real estate sector poised for a multi-year boom, benefiting related industries like cement and steel.

Global Challenges and Opportunities :

• Potential impacts of Donald Trump’s return on global trade: slower growth, capex delays, and trade imbalances.
• India positioned to benefit from the "China plus one" trend, attracting diversified supply chains.

Foreign vs. Domestic Investment Trends :

• Despite foreign outflows, domestic institutions have bolstered equity markets, which remain the fourth largest globally with a $5 trillion market cap.

Quick News Highlights :

• Government infused ?500 crore into IFCI, ensuring fiscal stability without additional debt.
• Venture capital funding grew by 14.1% in 2024, led by technology, consumer discretionary, and healthcare sectors.
• Gold loan NBFCs experienced tighter regulatory oversight, leading to increased gold auctions.

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