ALL TN Comp Exams Prep

The Website contains more than 2,00,000 questions. For each test, new questions are loaded.

September 24, 2025 Indian Economy Navigates Global Headwinds with Resilient Domestic Demand and Policy Reforms

India's economic landscape in the last 24 hours shows a mixed picture of robust growth forecasts tempered by global trade tensions and currency depreciation. While major rating agencies maintain optimistic GDP projections, the impact of new US tariffs has led to a moderation in private sector activity. The Indian Rupee hit an all-time low against the US dollar, primarily due to increased H-1B visa fees. Amidst these developments, the government is exploring policy reforms, including potentially increasing foreign investment limits in public sector banks.

In the latest economic assessments, India continues to demonstrate strong fundamentals despite emerging global challenges. S&P Global Ratings has maintained India's GDP growth forecast at 6.5% for the current fiscal year (ending March 31, 2026), attributing this resilience to robust domestic demand and a favorable monsoon season. The agency also anticipates a 25 basis point rate cut by the Reserve Bank of India (RBI) within this fiscal year, alongside a revised inflation forecast of 3.2%.

Echoing a positive outlook, the Organisation for Economic Cooperation and Development (OECD) has raised India's growth forecast for 2025-26 by 40 basis points to 6.7%. This upward revision is linked to monetary and fiscal policy easing, including reforms to the Goods and Services Tax (GST).

Impact of US Tariffs and Moderation in Private Sector Activity

However, India's economic activity experienced a slight slowdown in September, as indicated by the flash composite Purchasing Managers' Index (PMI), which slipped to 61.9 from 63.2 in August. This moderation is partly attributed to the 50% US tariffs imposed by President Donald Trump, effective August 27, 2025. These tariffs have notably affected new export orders. Both manufacturing and services sectors expanded at a softer pace, with Manufacturing PMI easing to 58.5 (from 59.3) and Services PMI falling to 61.6 (from 62.9).

Despite the external headwinds, domestic demand remains a key driver. Domestic orders saw a second consecutive month of growth, buoyed by cuts in the goods and services tax. Business confidence also improved to a seven-month high, driven by expectations of stronger domestic demand during the upcoming festive season.

Rupee Hits All-Time Low Amid H-1B Visa Fee Hike

The Indian Rupee faced significant pressure, depreciating by 47 paise to an all-time low of 88.75 against the U.S. dollar on September 23, 2025. This sharp decline is primarily linked to sustained outflows of foreign funds, triggered by a substantial hike in US H-1B visa fees. Analysts suggest this move could significantly impact Indian IT services exports and remittances, leading to concerns among forex traders.

Stock Market Performance and Policy Discussions

Indian equity markets witnessed mixed trading on September 23, with the Sensex and Nifty closing marginally lower. While banking and auto stocks like IndusInd Bank and Axis Bank showed gains, technology and consumer-focused companies such as Tech Mahindra and Trent experienced declines. The H-1B visa fee hike also contributed to the overall cautious sentiment in the market.

In a move to strengthen the financial sector, India is reportedly considering an increase in the foreign investment limit in Public Sector Banks (PSBs) from the current 20%. This initiative aims to help these banks raise capital more easily and enhance their global competitiveness, with the government assuring that it will retain at least a 51% stake to maintain their public character.

Back to All Articles