The Macro Memo | July 2025: Alignment in Motion

India’s Economic Momentum: Wide-Ranging, Firm-Footed, and Gaining Depth

Geopolitical tension has loomed large this year, keeping everyone on edge, until July brought a welcome calm. Amid it all, India continues to shine: strong demand, investor interest, and momentum across trade, sustainability, and markets.

India Trades at a Premium, Investors Say It’s Worth It

Even as global markets wobble under the weight of trade wars and monetary uncertainty, India’s premium valuation is holding and finding validation.

• The MSCI India Index trades at a forward P/E of ~22.5, nearly double the valuation of broader emerging markets.
• Despite the premium, global investors see it as justified.
• Key macro drivers include: resilient domestic demand, stable inflation & policy continuity.
• These factors reinforce that India’s premium is grounded in fundamentals, while EM peers still find their footing.

“India offers one of the most compelling opportunities across emerging markets for investors looking to tap into mega forces.”

— Vivek Paul, Head of Portfolio Research, Blackrock Investment Institute

India Gains Trade Edge as U.S. Tariffs Hit APAC Peers, Says Moody’s

“As global trade realigns under shifting tariff regimes and protectionist policies, India’s scale, policy direction, and trade pacts may help it outpace APAC peers.”
— Moody’s Ratings

As tariff shifts reshape trade routes, India stands to benefit, with Moody’s highlighting gains from U.S. tariffs on APAC peers.

FTAs with the UK and EU talks add momentum, while China-plus-one strategies boost India’s appeal. Moody’s tempers expectations, noting reshoring limits and slow transitions, but India is firmly in the game.

Government Doubles Down on Structural Reforms to Bolster Investor Confidence

Union Finance Minister Nirmala Sitharaman reiterated the government’s commitment to structural reform, underscoring continued progress.

She emphasized focus on:

• GST and income tax simplification
• Land monetization
• Strengthening regional rural banks
• Ensuring critical supplies

New Delhi aims to help attract, retain, and deploy capital with greater efficiency and predictability.

With Inflation in Check, RBI Eases Rates to Support Credit and Consumption

The RBI’s recent moves with rate cuts sent a clear message: growth matters, and liquidity is welcome.

Axis Bank and others expect credit demand to accelerate in H2 2025, especially in consumption-facing sectors. With inflation staying within target, the RBI’s shift from “accommodative” to “neutral” is being read as tactical.

“Geopolitical tensions will not impact India’s growth story, and with a rate cut, credit demand will increase.”

— Amitabh Chaudhry, MD and CEO, Axis Bank

Startup IPOs & ₹5.38 Lakh Cr in AIFs Point to Strengthening Domestic Investment Flows

• Over ₹26,000 crore in IPOs are lined up for July–August 2025, with strong participation from startups and mid-sized businesses.
• Startup-led IPOs alone could raise ₹18,000 crore, according to The Economic Times.
• On the private side, Alternative Investment Funds (AIFs) saw 32% year-on-year growth, reaching ₹5.38 lakh crore in assets by March 2025.
• Domestic GPs are scaling, raising larger funds and targeting underrepresented sectors like early-stage manufacturing, domestic SaaS, regional infra, and renewables.

Rural FMCG and Tier-2 Demand Drive India’s Consumption Revival

Even as exports face global headwinds, India’s domestic demand continues to anchor growth.

• FMCG recovery in rural areas is picking up.
• Two-wheelers, mid-tier durables, and discretionary spending show signs of revival across Tier 2/3 cities.

India may be “at an inflection point” where real income growth, easing inflation, and low household leverage are feeding into a more durable spending cycle.

India Breaks Into Top 100 of UN SDG Index for the First Time

• India entered the top 100 of the UN Sustainable Development Goals (SDG) Index in 2025, ranking 99th out of 167 countries.
• This marks a steady climb from 109th in 2024 and 112th in 2023, showing consistent progress in sustainable development.
• The Sustainable Development Report credits improvements in poverty reduction, clean energy access, and sanitation for this rise.
• Extreme poverty (living on less than $2.15/day) fell from 16.2% in 2011–12 to 2.3% in 2022–23, according to the World Bank.
• While less attention-grabbing than economic headlines like repo rate cuts or IPO booms, these changes signal real improvements in India’s social infrastructure.

Remittances Offset Nearly Half of India’s Trade Deficit, Surpassing FDI in FY25

• India received a record $135 billion in remittances in FY25, a 14% jump over the previous year.
• It remained the world’s largest remittance recipient, with top inflows from the U.S, U.K, and Singapore.
• Remittances made up over 10% of India’s $1 trillion gross current account inflows for FY25.
• Together with software and business services income (each over $100 billion), they accounted for more than 40% of total inflows.
• Remittances have remained higher than gross inward FDI, making them a more stable and reliable source of external capital.
• They’ve consistently served as a major source of funding for India’s trade deficit, offsetting nearly 47% of India’s $287 billion merchandise trade deficit in FY25.

Returns Flow Through India In Both Directions. $97B Out, $45B In

• Overseas investors repatriated a record $97.7 billion from Indian investments in FY25.
• Meanwhile, India earned $45 billion from its overseas investments, a 33% rise from the previous year.
• These two-way flows helped balance the investment income segment of the current account, reinforcing macro stability.

Confidence, Homegrown Direction

McKinsey Global Managing Partner Bob Sternfels, in a recent address, called India a unifying force to be reckoned with, praising its resilience, scale, and technology-led transformation.

“ The world is reconnecting in unexpected ways. I was in South America recently- Colombia, Argentina, Chile and CEOs there are showing real interest in India, which wasn’t the case two years ago.”

— Bob Sternfels, Global Managing Partner, McKinsey & Co.

When sentiment, structure, and leadership align, momentum compounds. The recent weeks offered clear signs of that alignment taking shape in India. This convergence has only grown stronger through the year, echoing the patterns we highlighted in the May and June editions of the Macro Memo.

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