India Defies Global Slowdown: Growth, Markets & Rupee Stay Strong

As the global economy braces for a slowdown, India is emerging as a rare bright spot. A new report by Kotak Alternate Asset Managers projects sharp deceleration in major economies like the US and China—by 90 and 60 basis points respectively—yet expects India to remain the fastest-growing major economy.

Key indicators support this optimism. India’s robust manufacturing activity, reflected in consistently strong PMI numbers, sets it apart from peers. Despite some soft spots in credit growth and government spending, the macroeconomic outlook remains stable. A favourable monsoon forecast is likely to spur rural demand and ease inflation pressures, offering a much-needed boost to agriculture. A report by Kotak Alternate Asset Managers forecasts sharp slowdowns in the US (down 90 bps) and China (down 60 bps), while India is expected to remain the fastest-growing major economy.

Manufacturing Momentum

Strong manufacturing PMI data signals resilient industrial activity. Despite weak credit and government spending, a favourable monsoon forecast may lift rural demand and ease inflationary pressures.
Market Resilience Amid Volatility Indian markets have bounced back from recent lows despite soft Q4 FY25 earnings and geopolitical tensions. DIIs remain solid buyers, and FPIs have turned net positive for the second straight month.

Rupee Rallies 
The Indian Rupee is strengthening, buoyed by lower oil prices, a softening USD, and renewed FPI inflows. The RBI has added $50 billion to forex reserves in just two months, now totalling $688 billion. The outlook remains cautiously optimistic with geopolitical tensions and global uncertainties looming. But India’s macro fundamentals offer enough cushion to navigate the turbulence.

IMF Recent Outlook
 

India is poised to overtake Japan and become the world’s fourth-largest economy in 2025, according to the latest World Economic Outlook released by the International Monetary Fund (IMF) in April. The IMF projects India’s gross domestic product (GDP) at current prices to reach $4,187.02 billion next year, narrowly edging past Japan’s projected GDP of $4,186.43 billion. This would mark a significant milestone in India's ascent on the global economic stage.

The top three spots will continue to be held by the United States ($30,507.22 billion), China ($19,231.71 billion), and Germany ($4,744.80 billion) in that order.

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