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- Sept 16, 2025
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Global Macroeconomic Update
Growth
- Global growth is projected at around 3.0% for 2025 and 3.1% for 2026 with some upward revisions from earlier forecasts (Source).
Eurozone
- Growth remained weak in August.
- The services sector slowed even though factories showed some stabilisation.
- Germany’s economy is expected to grow only 0.1% in 2025, showing near stagnation.
United Kingdom
- GDP in July was flat.
- Manufacturing remained weak, while services were more stable.
- This signals a fragile outlook for the second half of the year just as key policy decisions loom.
USA
- Real gross domestic product (GDP) increased at an annual rate of 3.3 % in the second quarter of 2025 (April, May, and June), according to the second estimate released by the U.S. Bureau of Economic Analysis.
- In the first quarter, real GDP decreased 0.5 %.
- The increase in real GDP in the second quarter primarily reflected a decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending. These movements were partly offset by decreases in investment and exports (Source)
Australia
- Q2 GDP growth hit its strongest pace in almost two years.
- Private sector demand is gradually replacing government spending in driving growth.
China
- August data was disappointing, with weak factory output and retail sales.
- Raises questions about whether China can still meet its annual growth target and sustain regional demand.
Brazil
- Economic activity declined for a third month in July, worse than expected.
- Suggests growth is slowing and momentum is fading.
Inflation
United States
- Inflation (CPI) in August came in higher than expected.
- But because overall disinflation trends and softer economic activity continue, markets still expect the Fed may lean toward cutting rates soon.
Eurozone
- Inflation ticked up slightly in August.
- The European Central Bank (ECB) kept policy unchanged in September and remains cautious, watching energy costs and services inflation closely.
Germany
- August inflation was confirmed at 2.1% (vs 1.8% in July) on the EU measure.
- Shows mild but noticeable price pressures compared with last month.
Japan
- Wholesale inflation rose in August, meaning companies face higher input costs.
- Consumer-side inflation is still mixed, suggesting uneven pass-through of these costs.
Monetary policy
- A September Fed cut was widely seen as a done deal, with at least one more likely by year‑end as labour softens and inflation risks balance against growth.
- The ECB held rates and said policy is “in a good place,” while signalling vigilance over cross‑country inflation divergence risks within the bloc.
- A poll pointed to the BoE holding on Sep 18 and cutting in Q4, reflecting stagnant growth and still‑elevated price dynamics in the UK.
- Market primers framed “central bank week” as pivotal for FX, rates, and risk assets into Q4 amid policy divergence across major economies.
Labor markets
- The U.S. unemployment rate neared a four‑year high with lackluster August payrolls, and weekly claims rose.
- Canada lost a net 65,500 jobs in August as unemployment rose to 7.1%, boosting near‑term rate‑cut bets and weighing on the Canadian dollar.
Trade and fiscal
- China’s August export growth slowed to a six‑month low, while U.S.–China talks in Spain kept tariff and tech frictions central for global supply chains.
- Mexico’s budget plan projected a lower deficit in 2026 with growth ticking up, offering a cautiously constructive fiscal backdrop amid uncertainty.
- The IMF flagged strains in the U.S. economy and tariff‑related inflation risks, underscoring policy trade‑offs into year‑end.
Commodities and markets
- OPEC maintained strong oil demand forecasts and said the global economy is doing well, even as crude slipped earlier on weak U.S. jobs data.
Regional snapshots
- United States: Hotter CPI but soft labour metrics kept a September cut in play, with additional easing likely amid housing and hiring headwinds.
- Euro zone: Slight CPI uptick with ECB on hold and investor sentiment deteriorating, leaving the outlook contingent on services and external demand.
- United Kingdom: Zero monthly GDP growth in July and a BoE poll pointing to hold‑now/cut‑later, underscoring a delicate soft‑landing path.
- China: August slump raised doubts on the annual growth target, compounding export softness and elevating calls for policy support.
- Canada and Australia: Canada’s job losses lifted rate‑cut bets and pressured the currency, while Australia’s faster Q2 GDP marked a shift toward private demand.
Indian Macroeconomic Update
Growth
- India’s real GDP which measures the output of economy (i.e. after removing effect of inflation) expanded by 6.5% in 2024-25. The Reserve Bank of India expects this pace to continue into 2025–26 (Source)
- Services momentum stayed strong, with the HSBC India Services PMI surging to 62.9 in August, the fastest pace in 15 years on robust new orders and firmer pricing power, while the Composite PMI rose to 63.2, indicating broad-based expansion across services and manufacturing inputs feeding into overall activity.
- The Services Purchasing Managers Index (Services PMI) is a monthly economic indicator based on a survey of executives from companies in the services sector—like banking, IT, hotels, transportation, and education. It measures changes in key business variables such as new orders, employment, and prices, compared to the previous month.
The index ranges from 0 to 100:
- Above 50 means the services sector is growing.
- Below 50 means the sector is shrinking.
- 50 means no change Services PMI is important because it gives an early signal of the health and direction of the economy’s largest sector, helping businesses, investors, and policymakers make informed decisions.
- The Composite Purchasing Managers Index (Composite PMI) is a combined measure that represents overall economic activity by merging data from both the manufacturing PMI and the services PMI into one single index. It provides a broad picture of the economy’s health by reflecting conditions in both the goods-producing (manufacturing) and service sectors.
- The Composite PMI is calculated by weighting the manufacturing and services PMIs according to each sector’s relative importance in the economy, often based on their contribution to GDP. A reading above 50 indicates overall economic expansion, while below 50 signals contraction.
- This combined index helps businesses, investors, and policymakers quickly assess the general direction and momentum of economic activity across multiple sectors rather than looking at manufacturing or services separately. It acts as a leading economic indicator that signals growth or slowdown trends early
Inflation
- Headline CPI quickened to 2.07% in August from 1.61% in July, well within the RBI’s 2%–6% band, driven by a smaller decline in food prices and modest firming in categories like vegetables and personal care
- The CPI release noted Consumer Food Price Index (CFPI) at −0.69% year-on-year, with authorities attributing the uptick mainly to vegetables, meat and fish, oils and fats, personal care, and eggs, while broader inflation remained subdued by historical standards.
- Wholesale inflation turned positive at 0.52% in August after two months of deflation, led by food and manufacturing components, adding nuance to the disinflation narrative as input costs re‑emerge in select pockets.
Monetary policy
- Despite the CPI uptick, subdued headline inflation and a resilient disinflation trend leave room for further easing later in 2025, keeping rate‑cut expectations intact post‑print.
- Policy expectations remain anchored by low headline readings and a view that price pressures are contained relative to the midpoint of the target, with markets watching global central bank cues and domestic data flow into the RBI’s next meetings.
External sector
- The merchandise trade deficit narrowed to $26.49 billion in August from $27.35 billion in July as exports rose 6.7% year‑on‑year to $35.1 billion and imports fell 10.12% to $61.59 billion, with officials and media noting tariff‑related uncertainty in key markets during the month.
- The improvement in August came amid shifting market mix and cautious shipment strategies, even as the cumulative gap remains wide early in FY26.
FX and markets
- The rupee ended nearly flat on Sep 15; a softer dollar provided support but importer hedging and modest portfolio flows capped gains as traders digested the August trade data and global central‑bank signaling.
- Market desks flagged that global “central bank week” dynamics would keep INR and rates markets sensitive to external signals through mid‑September.
Sectoral insights
- Services: Demand was broad‑based with record‑pace price pass‑through in over a decade, and firms continued hiring, reinforcing the domestic demand narrative even as input cost pressures re‑emerged in selected service categories.
- Energy: Fuel consumption slipped to an 11‑month low in August on a monthly basis; diesel usage fell sharply month‑on‑month while gasoline demand rose year‑on‑year, reflecting seasonal patterns and mixed mobility trends into Q3 FY26.
- Autos and fuels: The continued rollout of E20 ethanol‑blended fuel generated friction in the auto market, with concerns over compatibility and consumer confusion highlighted during the period, a factor to watch for downstream demand and servicing patterns.
A. Impact of Trump Tariff
A1. Overview of Trump Tariffs
- In 2025, the Trump administration imposed steep tariffs on multiple imported goods, including a 50% tariff on key Indian exports to the US. These tariffs were introduced in phases: an initial 25% tariff followed by an additional 25% in late August 2025.
- The tariffs target critical sectors such as steel, aluminum, gems, jewelry, textiles, footwear, furniture, and chemicals.
- The aim of these tariffs is to reduce the US trade deficit and promote domestic production but comes with global economic risks including trade fragmentation and supply chain disruptions.
A2. Impact on Indian Economy
- India faces one of the highest tariff burdens at 50% on key exports to the US.
- Key sectors affected include textiles, gems and jewelry, leather products, shrimp, carpets, and chemicals.
- The tariffs are estimated to reduce India’s GDP growth by approximately 0.5% to 0.6% for FY2025-26, which could translate into a contraction between $7 to $25 billion in economic output.
- Indian exports to the US, which were around $86.5 billion in 2025, may decline sharply to an estimated $50 billion by 2026 due to the tariff impact. (Source)
- With the US being India’s largest trading partner, these tariffs threaten export competitiveness against rivals like China, risking job losses particularly in labor-intensive industries.
India’s Response and Policy Measures
- India has resisted retaliatory tariffs and instead focused on strategic responses to enhance economic resilience.
- The government accelerated reforms including GST restructuring, pushed the ‘Make in India’ initiative to boost domestic manufacturing, and advocated for ‘Swadeshi’ to promote Indian-made products.
- Initiatives include enhanced credit support for MSMEs, export promotion missions worth ₹25,000 crore, and sector-specific schemes for labor-intensive industries to safeguard employment. (Source)
- There is an emphasis on diversifying trade partnerships and reducing dependence on US markets to mitigate risk.
- Diplomatic negotiations between India and the US have recently resumed aiming for a trade deal to ease tensions and tariff barriers
B. New GST reforms
- GST simplified to a two-slab structure (5% & 18%)
- GST reforms cut taxes on household essentials (soaps, toothpaste, Indian breads) to 5% or Nil boosting affordability
- Life-saving drugs, medicines reduced from 12% to Nil or 5% making healthcare affordable
- Two-wheelers, small cars, TVs, ACs, cement cut from 28% to 18% bringing relief to middle-class
- Farm machinery, irrigation equipment cut from 12% to 5%, reducing farming costs
- Tobacco, pan masala, aerated drinks, and luxury goods taxed at 40%
C. Stock market updates
C1. Current Stock Market Updates (September 18, 2025)
- The NSE Sensex traded around 25,371 levels.
- Market sentiment is buoyed by expectations of easing global monetary policies and positive domestic consumption trends.
C2. Future outlook
- Analysts expect Nifty to potentially reach around 26,500 by end-2025, reflecting roughly a 6% rise from current levels, with continued gains into mid and late 2026 (estimated targets of 27,300 and 28,000 respectively).
- The broader equity market rally is expected to be supported by earnings growth, steady domestic investor flows, and government infrastructure spending.
- However, concerns remain over high market valuations, potential short-term corrections, and external risks like global geopolitical tensions and trade uncertainties.
- Sectors likely to outperform include small-cap and value stocks, communications, healthcare, energy, and real estate.
- Interest rate cuts by the US Fed and stable inflation may provide a positive backdrop, but caution due to global economic volatility persists.
- Domestic factors such as improving corporate earnings, government reforms, and strong capital expenditure will underpin market resilience
Key Numbers - India
Metric | Value / Estimate | Notes / Relevance |
GDP Growth (Real, India, FY24-25) | ~ 6.5% (Press Information Bureau) | Highest among large economies; sets base for business optimism. |
Nominal GDP (FY25 estimate) | ~ ₹1,87,97,000 crore (~ US$2.20 trillion) (Press Information Bureau) | Helps with scale comparisons; calculating Govt receipts / spending as % of GDP. |
Inflation / CPI | ~ 5.0% (recent) (World Bank Open Data) | RBI target band; effect on real incomes, interest rates. |
Current Account Deficit (CAD) FY25 | $23.3 billion (0.6% of GDP) during 2024-25, lower than $26 billion (0.7% of GDP) during 2023-24 $13.5 billion current account surplus in Q4FY25 (The Hindu) | Q4 surplus is driven by remittances from Indians living abroad. |
FDI Inflows | ₹4,81,663 crore in first 8 months of FY25 (~US$55.6B) (India Brand Equity Foundation) | Important for capital formation, capacity expansion. |
Forex Reserves | (Recent reports) ~US$698.3 billion (incl. gold) (The Times of India) | Gives buffer vs external shocks, stabilises currency/risk perception. |
Metric | Value | Context / Implication |
Fiscal Deficit target (FY26) | 4.4% of GDP (Press Information Bureau) | Down from the revised estimate for FY25 (~4.8%); shows focus on fiscal consolidation. |
Revenue Deficit target | 1.5% of GDP (PRS Legislative Research) | Difference between what the government spends on operations vs what it earns (excluding borrowings). Lower = better. |
Primary Deficit | 0.8% of GDP (i.e. fiscal deficit minus interest payments) (PRS Legislative Research) | Reflects borrowing excluding debt servicing; a key in assessing true borrowing pressure. |
Outstanding Liabilities (Central Govt. Debt) | ~ 56.1% of GDP in FY25-26 (PRS Legislative Research) | Shows debt burden; government also wants to bring this down to ~50% by March 2031. (Reuters) |
Gross Market Borrowings | ₹14.82 lakh crore (~ borrowings via government bonds etc.) (Press Information Bureau) | Key for bond markets, interest rates, investment flows. |
Capex (Capital Expenditure) in FY26 Budget Estimate | ₹11.21 lakh crore ≈ 3.1% of GDP (Press Information Bureau) | Emphasis on infrastructure / public investment; companies in infra, construction etc. will care. |
Revised Estimates for 2024-25 — Expenditure & Receipts | Total expenditure ~ ₹47.16 lakh crore, of which capital expenditure ~ ₹10.18 lakh crore; total non-borrowed receipts ~ ₹31.47 lakh crore, net tax receipts ~ ₹25.57 lakh crore (Press Information Bureau) | Useful to compare what was spent vs budgeted; helps assess slippages / government performance. |
Disinvestment Target | ₹47,000 crore for FY26 (lower than FY25 target) (PRS Legislative Research) | Shows how much the government plans to raise via selling stakes in PSUs; impacts sectors, investor sentiment. |
Support / Capital Spending to States | ₹3.6 lakh crore 50-year interest-free loans under “Special Assistance to States for Capital Investment (SASCI)” for capital expenditure to states. Also, ₹1.5 lakh crore outlay for long-term loans to states for infra. (India Budget) | Important for state infra development; shows centre-state fiscal relations and growth engines spread across regions. |
Sector | Sub-Sector | % Share of GDP/GVA (FY25) | Growth Rate FY25 (Real, YoY) | Workforce Share (approx) |
Primary | Agriculture, Forestry, Fishing & Livestock | ~15.6% | +4.0–4.5% | ~40% |
Mining & Quarrying | ~2.3% | +2.7% | <1% | |
Secondary | Manufacturing | ~13.5% | +4.5% | ~12% |
Electricity, Gas, Water & Other Utilities | ~2.5% | +5.9% | <1% | |
Construction | ~8.0% | +9.4% | ~12% | |
Tertiary | Trade, Hotels, Transport & Communication | ~18.0% | +6.1% | ~15% |
Financial, Real Estate & Professional Services | ~22.0% | +7.2% | ~8% | |
↳ IT/ITeS (IT–BPM) | ~7.3% (≈13% of services) | ~8–9% | ~3–4% | |
Public Administration, Defence & Other Services | ~12.0% | +8.9% | ~6% |
Insights
- Agriculture: ~16% of GDP but ~40% of workforce → productivity gap → explains rural distress, low incomes, migration to cities.
- IT/ITES: ~7% of GDP with just ~3–4% workforce → high productivity per worker → India’s global edge.
- Manufacturing: 13–14% of GDP with ~12% workforce → balanced but stagnant → India’s goal is 25% GDP share via PLI & Make in India.
- Construction (9.4% growth) → infra push, multiplier effect on steel, cement, jobs.
- Public Admin & Defence (8.9% growth) → reflects govt capex, welfare spending.
- IT/ITES (~8–9% growth) → resilient exports despite global slowdown.
- Agriculture steady at ~4–5% → depends heavily on monsoon, MSP, food inflation.
- Overdependence on monsoons → inflation risk from agri shocks.
- Oil imports (~85% dependency) → external vulnerability, CAD.
- Fiscal focus on infra (₹11.2 lakh cr capex in FY26 budget) → boosting construction & allied sectors.
- Services growth supported by Digital Public Infrastructure (UPI, ONDC, Account Aggregator).
Sources:
https://www.reuters.com/markets/europe/ecb-holds-rates-unchanged-still-in-good-place-2025-09-10/
https://www.reuters.com/world/uk/poll-boe-hold-rates-september-18-cut-q4-more-economists-see-no-move-this-year-2025-09-12/
https://www.reuters.com/world/us/us-consumer-prices-increase-more-than-expected-august-2025-09-11/
https://www.reuters.com/world/uk/uk-economy-makes-weak-start-second-half-year-2025-09-12/
https://www.reuters.com/markets/asia/japan-wholesale-inflation-accelerates-august-2025-09-11/
https://www.reuters.com/business/take-five/global-markets-themes-repeat-graphic-2025-09-12/
https://www.reuters.com/business/finance/global-markets-cenbank-graphic-2025-09-11/
https://www.reuters.com/world/india/indias-inflation-edges-up-rate-cut-bets-stay-alive-2025-09-12/
https://www.mospi.gov.in/sites/default/files/press_release/CPI_PR_12sep25.pdf
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