Macro Memo | August 2025

Tariffs Abroad, Tenacity at Home

“We are not people who sit by the shore of stagnant water, throwing stones for amusement — we are the people who change the course of fast-flowing rivers.”
— Narendra Modi, Prime Minister of India

This August, as India marks 79 years of independence, pride and self-assuredness define the moment. Nearly eight decades of transformation have built today’s confidence: India stands as the world’s fastest-growing major economy, with its leaders and businessmen increasingly unapologetic in backing the country’s trajectory.

The imposition of fresh U.S. tariffs on Indian exports sparked headlines, but the reaction within India was striking. Rather than concede it as a setback, policymakers and business leaders projected strength, insisting it was a chance to turn adversity into advantage. At the same time, domestic capital continued to deepen, IPO markets stayed buoyant, and global investors reaffirmed India as a strong long-term bet.

The themes of this edition converge on one idea: external shocks are inevitable, but India’s response, rooted in confidence, resilience, and reform, is fast becoming its differentiator.

The sections ahead highlight the key developments and themes from the past month that, together, capture the essence of India’s economic story today.

Atmanirbhar Bharat as Unanimous Resolve

The response to the U.S. tariff escalation showcased a unified confidence. As the Economic Times noted, India Inc rallied behind a “roaring Brand India”, with top business leaders coming out strongly in support of the country. The message was clear and assertive: India’s growth story is bigger than any tariff wall.

Echoing the Atmanirbhar spirit, Zomato’s Deepinder Goyal noted:

“Global powers will always bully us, unless we take our destiny in our own hands. And the only way to do that is if we collectively decide to become the world’s largest most unapologetic superpower in the world. In economy, in technology, in defence, and most importantly, in ambition.”

That conviction is finding expression in concrete steps. Semiconductor projects are set to be unveiled this year, with the first made-in-India chips nearing launch. A sector once seen as out of reach is now firmly in play.

In defence, short-range ballistic missiles, Prithvi-II and Agni-I, were successfully test-fired under the aegis of the Strategic Forces Command in July. This is a signal of both technological capacity and strategic independence.

Together, these moves underline the Atmanirbhar Bharat posture: India is building the capabilities that reduce external dependence and expand national confidence.

India’s First S&P Upgrade in 18 Years as External Endorsement

The confidence expressed by India’s leaders now has global endorsement.

On August 14, 2025, S&P Global upgraded India’s sovereign rating to BBB from BBB-, its first upward revision in nearly two decades. The agency cited buoyant economic growth, a strong monetary policy framework anchoring inflation, and steady fiscal consolidation as the foundations of its decision to raise India’s sovereign rating.

India’s Investability as Global Consensus

The confidence visible at home and validated by rating agencies is also being echoed by global investors and technology leaders, with India being recognised as one of the most investable opportunities on the global stage.

At the ET World Leaders Forum, Jefferies’ Global Head of Equity Strategy, Christopher Wood, described India as “the best long-term stock market story in the world” and “the most dynamic capital market globally.” He pointed to cleaned-up banks, deleveraged corporates, and a booming domestic investment engine as pillars of sustainability, even amid expensive valuations.

Crucially, he underlined the role of domestic savings in sustaining this momentum.

“The ongoing boom in the domestic asset management industry and wealth management industry is a hugely successful story, and one I expect to continue.”
—Christopher Wood, Global Head of Equity Strategy, Jefferies

India’s positive assessment is mirrored by a steady chorus from Wall Street to Silicon Valley. Global equity strategists continue to rank India as the top global bet, while OpenAI’s Sam Altman declared, “We are excited to invest much more in India,” as the firm plans to open its first office in the country this year. Altman cited India’s deep pool of tech talent, thriving developer ecosystem, and strong policy backing (such as the IndiaAI Mission) as the foundations for its rise as a global AI leader.

Even foreign portfolio investors (FPIs), net sellers in the listed market this year, are betting big on India’s growth by stepping up as committed anchor investors in IPOs. Their appetite shows that despite near-term noise, global capital wants a front-row seat in India’s long-term story.

Together, these perspectives converge on a single idea: India is becoming increasingly investable, commanding long-term conviction from global capital and innovation leaders alike.

Domestic Capital as India’s Backbone

If global conviction reinforces the story, it is domestic investors who increasingly anchor it. SEBI’s Ananth Narayan highlighted that between April 2019 and June 2025, Indian investors brought in nearly ₹18 lakh crore (~$210 billion) into equity-oriented mutual fund schemes, 7x the FPI tally, with mutual funds compounding at ~15% annually over the same period.

That momentum has only intensified. In the past 12 months, domestic institutional investors (DIIs) brought in record inflows into the equity market, roughly double the quantum of FPI outflows. The magnitude of domestic counter-buying against heavy FPI selling far surpasses previous episodes, including the Global Financial Crisis of 2008 and the sell-off of 2022. Systematic investment plans (SIPs) have turned households into a stabilising force, ensuring steady inflows even during bouts of volatility.

The shift is visible in the IPO market as well. DIIs now account for more than half of IPO anchor book allocations in India, overtaking FPIs as the decisive force in primary capital formation. This reflects not just depth of savings but also growing confidence in India’s corporate growth pipeline.

Beyond public markets, domestic capital is now reshaping private ones as well. Narayan noted that commitments into Alternate Investment Funds (AIFs) stood at ₹13.5 lakh crore as of March 2025, up by ₹1.7 lakh crore in just one year.

“Over the past five years, AIF commitments have grown at a CAGR of 30% – clear evidence of a deepening and broadening of a crucial component of the capital market.”
—Ananth Narayan, Whole-Time Member, SEBI

The rise of AIFs underscores how Indian savings are no longer confined to listed equities but are increasingly backing private equity, venture, real estate, and credit strategies.

Together, these flows mark a structural handoff. The “home bid” has reduced India’s reliance on fickle foreign capital, broadened domestic participation across both public and private markets, deepened liquidity, and made the financial system more resilient. If external voices define India as investable, domestic investors ensure it remains unshakable.

Policy Credibility as India’s Anchor

If domestic capital is the market’s backbone, policy is its foundation. India’s recent inflation record is striking: despite repeated shocks from food price spikes, volatile oil markets, and global supply chain disruptions, price pressures have remained contained. RBI Governor Sanjay Malhotra credited proactive monetary action, including timely repo rate adjustments, liquidity management, and close coordination with supply-side measures by the government, for preventing broad-based inflation.

Since February, the central bank has lowered the repo rate by 100 basis points while keeping liquidity ample, a stance designed to shield the economy from tariff shocks while supporting growth.

On the fiscal side, Prime Minister Modi recently announced the next-generation GST reforms, designed around three pillars: structural reforms, rate rationalisation, and ease of living. The overhaul simplifies slabs to 18% and 5%, shifts most goods out of the 28% bracket, and reserves higher rates only for “sin goods.”

Prime Minister Modi emphasised that “every family, the poor and the middle class, small and big entrepreneurs, and every trader and businessman will benefit from this”. For the common man, that means a more rational, predictable tax burden. For MSMEs, it means lower compliance costs, pre-filled returns, and faster refunds that ease working capital pressure.

Together, monetary prudence and fiscal reform are providing India with a solid foundation. Inflation is under control, tax systems are becoming simpler and more equitable, and the policy architecture is firmly focused on making growth broad-based and resilient.

Resilience, Reform, and Resolve as India’s Differentiator

79 years after independence, India’s economic story is defined by its ability to turn external shocks into momentum. From self-reliance in industry to global endorsement of its credit and markets, from the rise of domestic savings to the steadiness of policy, the strands converge into a single narrative: a nation confident in its trajectory, resilient in its foundations, and unapologetic in its ambition.