India's economic landscape is buzzing with activity, marked by strong pronouncements from Prime Minister Narendra Modi and key regulatory developments. Speaking at the Economic Times World Leaders Forum, PM Modi asserted that India is currently the world's fastest-growing major economy and is on track to become the third-largest globally very soon. He further projected India's contribution to global growth to reach approximately 20% in the near future.
The Prime Minister attributed this resilience and growth to a decade of macroeconomic stability, highlighting a projected fiscal deficit reduction to 4.4% despite the challenges posed by the COVID-19 pandemic. He emphasized the strength of Indian banks, low inflation and interest rates, a controlled current account deficit, and robust foreign exchange reserves. Modi also noted the increasing participation of domestic investors through Systematic Investment Plans (SIPs) and record fundraising by Indian companies from capital markets.
Looking ahead, PM Modi announced that next-generation Goods and Services Tax (GST) reforms aimed at simplifying the law and reducing prices would be completed before Diwali. He also underscored India's ambitious technological strides, including the establishment of semiconductor factories with the first domestically made chip expected by the end of 2025, and rapid progress on Made in India 6G technology. The government is actively promoting private sector investment in research and development across critical sectors like clean energy, quantum technology, battery storage, and biotechnology, aligning with the vision of a developed India by 2047.
In other significant economic news, the Reserve Bank of India (RBI) approved Sumitomo Mitsui Banking Corporation (SMBC) to acquire up to a 24.99% stake in Yes Bank. This approval, valid for one year from August 22, 2025, clarifies that SMBC will not be classified as a promoter of Yes Bank, though the transaction awaits Competition Commission of India (CCI) clearance. The RBI has also initiated a review of its inflation targeting framework, inviting public feedback until September 18, 2025, on whether to narrow the existing +/- 2% tolerance band around the 4% inflation target. India's forex reserves continued their upward trend, increasing for the second consecutive week to reach $695.10 billion.
On the market front, Indian equities saw a dip on Friday, August 23rd, ending a six-day rally. Both the Nifty and Sensex declined by 0.85% due to profit booking and concerns over impending US tariffs. The US is set to impose additional 25% tariffs on Indian exports starting August 27th, which economists estimate could potentially drag India's GDP growth below 6%. In response, the Indian government is reportedly planning a support package worth Rs 25,000 crore under the Export Promotion Mission (EPM) to cushion exporters from the tariff impact. Despite these concerns, Indian businesses remain optimistic. Foreign Institutional Investors (FIIs) continued their selling spree in August, offloading Rs 25,564 crore worth of equities, primarily attributed to high valuations in India compared to other global markets.