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September 12, 2025 Indian Economy Navigates Growth, Trade Dynamics, and Market Shifts

India continues to cement its position as the world's fastest-growing large economy, with updated growth forecasts and significant corporate activities, including a major share buyback by Infosys and the emergence of new Unicorns. The financial markets are experiencing shifts, with the Rupee hitting a record low and foreign investors reassessing valuations. Concurrently, the government is actively pursuing trade agreements and implementing economic reforms, while the banking sector anticipates dividend adjustments.

India's Robust Economic Growth and Future Outlook

India is reinforcing its status as the world's fastest-growing large economy, a sentiment echoed by Union Minister of Commerce and Industry Shri Piyush Goyal at FICCI Leads 2025. This growth is anchored on resilience, inclusivity, and action-oriented leadership, with a focus on attracting significant investments through free trade agreements. Fitch Ratings has revised India's GDP growth forecast for the fiscal year ending March 2026 upwards to 6.9% from an earlier 6.5%, attributing this to robust domestic demand. Domestic consumption is expected to be a primary growth driver, supported by strong real income dynamics and looser financial conditions that should boost investment.

Key Corporate Developments and Startup Ecosystem

In a major corporate announcement, Infosys Ltd. declared its biggest-ever share buyback program, valued at ā‚¹18,000 crore. This move signals the management's confidence in the company's long-term cash flows and growth prospects. India's startup ecosystem continues its impressive expansion, welcoming 11 new Unicorns in 2025, bringing the total tally to 73. These new billion-dollar players span diverse sectors, including FinTech, AI, AutoTech, and E-commerce, with Ai.tech leading the new wave.

Financial Market Movements and Investor Sentiment

The Indian Rupee recently experienced a significant depreciation, plunging 36 paise to close at an all-time low of 88.47 against the U.S. dollar, amidst ongoing trade turmoil and strong dollar demand. Foreign institutional investors (FIIs) have also shown a trend of net selling, withdrawing funds due to a stronger dollar and U.S. tariff concerns. While India's equity valuations have eased below historical averages, they remain elevated compared to Asian peers, prompting foreign fund managers to re-evaluate their exposure.

Trade Relations and Government Initiatives

India's trade discussions with the United States are progressing positively, with both nations working towards finalizing the first tranche of a bilateral trade deal. Union Commerce and Industry Minister Piyush Goyal highlighted that significant progress has been made in these talks. Furthermore, India has successfully concluded Free Trade Agreements (FTAs) with Mauritius, the UAE, Australia, and the EFTA nations, with negotiations with the UK and EU in advanced stages. These agreements are anticipated to attract approximately USD 500 billion in investments. On the domestic front, the government is also focusing on GST reforms, which are expected to boost consumption and the overall economy.

Banking Sector Outlook

The Indian banking sector is bracing for a period of adjusted profitability. Indian banks are projected to reduce dividend payments for the fiscal year ending March 2026, marking the first such instance in four years. This anticipated decline is attributed to pressure on profitability stemming from a slowdown in loan growth.

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