A Stable Political Environment and Infrastructure Investment to Propel India's Economy in 2025
Click to start listening
New Delhi, Dec 31 (NationPress) After demonstrating resilience in 2024 despite geopolitical challenges, the Indian economy is expected to benefit from a stable political landscape, supportive policy conditions, the positive effects of Production-Linked Incentive (PLI) schemes, opportunities arising from transformations in the global supply chain, and an increased focus on infrastructure investment by the government.
The central government is prioritizing growth through direct budgetary investments, along with reforms such as GST (which boosts tax-to-GDP ratios), reduced corporate taxes, and improving the ease of doing business to attract private capital expenditures and investments driven by incentives aimed at import substitution and export ecosystem development.
A report from Canara Robeco Mutual Fund titled “Unfolding Perspectives” indicated that for 2025, corporate and bank balance sheets are well-positioned to bolster capital expenditures and credit, respectively, as consumer spending continues to show resilience.
“We foresee a reduction in the lag effect stemming from increased global commodity prices, affecting both food and non-food sectors,” the report noted.
Domestic institutional investment (DII) inflows are becoming increasingly significant, paralleling foreign portfolio investment (FPI) flows, with retail investments being increasingly channeled through insurance, EPFO, and mutual funds.
“Currently, the monthly SIP inflow in Indian mutual funds amounts to Rs 25,300 crore, which should provide substantial support to the markets, particularly if foreign institutional investors (FII) withdraw further,” the report highlighted.
The Indian macroeconomic landscape remains robust compared to other major markets, except for growth metrics. The Current Account Deficit (CAD) has shown considerable improvement and is projected to be at 1 percent for FY25.
Strong services exports and healthy remittance flows are expected to ensure that the country’s CAD remains within safe limits throughout the current financial year (FY 2024-25), as per a report from Crisil.
“We estimate the CAD to be around 1.0 percent of GDP for the fiscal year 2024-25, compared to 0.7 percent the previous year. Moreover, the repercussions of geopolitical issues will remain manageable,” the report stated.
Most domestic macro and micro indicators are stable. Given these factors, the domestic equity market remains committed to focusing on earnings, according to industry analysts.
Government expenditure has resumed, job creation is on the rise, and supply chain disruptions are diminishing.
Industry experts predict that the domestic stock market in 2025 is set to benefit from strong economic growth and government initiatives aimed at enhancing infrastructure and digital innovation.
“Sectors such as capital goods, technology, financial services, consumer goods, and healthcare are anticipated to flourish, while emerging sectors like semiconductors, electronics manufacturing, renewable energy, and electric mobility will draw increased attention,” stated Deepak Ramaraju, Senior Fund Manager at Shriram AMC.
