The Indian economy is currently exhibiting strong momentum, with recent data indicating broad-based strength across various sectors. The Index of Eight Core Industries (ICI) recorded a 2% growth in July 2025 compared to the same period last year, primarily driven by robust double-digit growth in steel (12.8%) and cement (11.7%) production, reflecting strong demand from infrastructure and construction activities. Online retail is experiencing explosive growth, especially in Tier II and III cities, which now account for over 60% of e-commerce transactions, highlighting broadening digital inclusion. Quick commerce, in particular, is surging at an annual growth rate of 70-80%, positioning India as the fastest-growing quick commerce market globally. Prime Minister Narendra Modi has stated that India is poised to become the world's third-largest major economy and is on track to become a developed nation by 2047, emphasizing India's potential to contribute to global growth.
In a significant policy development, the Indian government is considering substantial cuts to the Goods and Services Tax (GST) on everyday goods. These proposed reforms aim to simplify the current complex four-tier GST structure (ranging from 5% to 28%) into two main tiers, taxing most goods at either 5% or 18%. Termed a "Diwali gift" by the Indian leader, these changes could provide billions of dollars in annual relief to households and boost domestic demand. This move is also seen as a strategic measure to cushion the impact of potential US tariffs. The US, under the Trump administration, has threatened to double import duties on India from 25% to 50% as a punitive measure for New Delhi's continued purchase of oil from Russia.
Despite US pressure, India has firmly maintained its position on oil imports, with its envoy to Russia stating that India will continue to buy oil from "wherever it gets the best deal" to ensure energy security for its 1.4 billion citizens. India has called Washington's stance "unfair, unreasonable and unjustified." Economists estimate that without a trade deal, the threatened US tariffs could drag India's GDP growth below 6% this fiscal year, lower than the central bank's projections of 6.5%. However, the proposed GST cuts, if approved by the GST Council, could help offset these tariff risks. The prospect of these tax cuts has, however, led to a resurfacing of fiscal concerns, causing India's bond rally to collapse and pushing yields higher.
Beyond domestic economic measures, India's outbound investments have surged dramatically, increasing by 67.7% to USD 41.6 billion in FY2024-25, up from USD 24.8 billion in the previous fiscal year. This significant rise, accompanied by a 15% increase in the number of transactions, is attributed to factors such as Environmental, Social, and Governance (ESG) considerations, the growth of GIFT City, and global tax reforms.
In international cooperation, India and Japan are finalizing a new bilateral framework to strengthen collaboration in economic security. This framework will focus on securing stable supply chains for critical goods across key sectors including semiconductors, essential minerals, communications, clean energy, artificial intelligence (AI), and pharmaceuticals. A dedicated AI Cooperation Initiative is also being prepared to foster ties between Japanese and Indian startups and tech firms in the AI space.
On the stock market front, Indian equity markets remain buoyant, with the Nifty index having decisively broken above the 25,000 mark, buoyed by domestic liquidity and optimism surrounding the proposed GST reforms. Analysts have provided various stock recommendations for August 25, 2025. Corporate news includes Foseco India signing an agreement to acquire a 75% stake in Morganite Crucible India, PNB Housing Finance being authorized to offer Non-Convertible Debentures, and IndiGo and Max Healthcare set to join the Nifty index.