India's GDP growth for the fiscal year 2024-25 is estimated at 6.5%, marking a slowdown from the 9.2% growth recorded in FY2023-24. This deceleration reflects a return to more sustainable growth levels after the pandemic recovery surge, influenced by tighter monetary policy from the RBI, elevated global energy prices, and slower growth in key Asian economies. Despite these headwinds, the growth rate remains above the historical average of around 6.4%, underscoring India’s economic resilience. Morgan Stanley’s upward revision to a 6.7% forecast for FY2025-26 factors in strong Q1 results with 7.8% growth, robust consumption, and expected GST rate cuts designed to stimulate demand. Key sectors driving GDP include manufacturing, services, and agriculture, with agriculture benefiting from a favorable monsoon and good kharif sowing. However, external demand remains subdued due to global trade tensions and higher US tariffs, partially offset by front-loading of exports before tariff hikes. For investors, this environment suggests opportunities in domestic consumption plays, infrastructure, and export-oriented companies with diversified markets. Caution is warranted on sectors vulnerable to global shocks or interest rate fluctuations. Monitoring RBI policy and government fiscal support will be critical for positioning portfolios effectively.

Inflation in India in 2025 has moderated compared to the high inflationary pressures seen during the immediate post-pandemic period. Consumer Price Index (CPI) inflation has remained within the Reserve Bank of India’s target band of 4% ± 2%, aided by stable food prices and easing energy costs. The RBI’s monetary policy stance has been calibrated to balance inflation control with growth support, maintaining key policy rates at levels that temper demand without stifling investment. Core inflation, excluding volatile food and fuel components, has shown persistence, reflecting underlying demand pressures and wage growth. Supply-side factors, including improved logistics and buffer stocks, have helped contain food inflation, a critical component for Indian consumers. The RBI’s interventions in foreign exchange markets to defend the rupee have also contributed to currency stability, indirectly influencing inflation expectations. For investors, inflation trends impact fixed-income yields, equity valuations, and consumer spending patterns. Inflation-linked bonds and sectors with pricing power, such as FMCG and pharmaceuticals, present defensive investment avenues. Conversely, rising input costs in manufacturing and infrastructure sectors require careful monitoring for margin pressures.

Employment in India in 2025 shows signs of gradual recovery from the pandemic-induced disruptions but faces structural challenges. The labor market is marked by a rise in formal employment, aided by government schemes promoting social security and digital job platforms. The National Employment Policy emphasizes skill development, entrepreneurship, and sectoral diversification to absorb the growing workforce. Urban employment growth is driven by services and manufacturing, while rural employment benefits from agricultural resilience and allied activities. However, underemployment and informal sector vulnerabilities persist, particularly among migrant workers and women. The expansion of the gig economy and digital platforms is creating new job opportunities but also raising questions about job security and benefits. For investors, sectors with high employment elasticity such as consumer goods, retail, and infrastructure present growth potential aligned with rising incomes. Risk factors include automation-driven job displacement and global economic uncertainties affecting export-oriented employment.