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India's Economy: Boom and Bust in 2025
11 Jan
Summary
- Auto sector surged due to unexpected GST cuts supporting earnings.
- Indian rupee saw a sharp 6% depreciation driven by trade deficits.
- Foreign investors withdrew $17.7 billion amid slowing earnings momentum.
The Indian economic landscape in 2025 presented a tale of contrasts, with certain sectors experiencing significant gains while broader market indicators pointed to growing concerns. The automotive industry, in particular, saw a remarkable upswing, largely attributed to a substantial and unanticipated reduction in Goods and Services Tax (GST). This fiscal measure not only bolstered corporate earnings but also positively influenced stock valuations within the sector.
Conversely, the year was marked by several headwinds that constrained market performance. Earnings growth across the board remained sluggish, projected at a mere 6-8% for FY2025-26, and was further dampened by consistent financial performance downgrades. A significant factor contributing to economic pressure was the sharp depreciation of the Indian rupee by approximately 6%. This decline was primarily instigated by a deteriorating trade balance, exacerbated by the imposition of steep tariffs by the United States.
