India's economic growth story remains strong despite global headwinds, according to a recent Market Outlook report by PL Wealth, the wealth management arm of PL Capital (Prabhudas Lilladher). The report, released in September 2025, highlights India's resilient macroeconomic momentum, supported by factors such as a normal monsoon, sustained policy reforms, government capital expenditure (capex), and the increasing financialization of savings.

Key Growth Drivers

Several factors are contributing to India's robust growth:

• GDP Growth: India's GDP for the first quarter of fiscal year 2026 (FY26) exceeded expectations, growing at 7.8% year-on-year (YoY). This growth was driven by strong manufacturing, front-loaded government capex, and a favorable deflator.
• GST Rationalization: The Goods and Services Tax (GST) rationalization, effective in September 2025, is expected to further boost growth by 0.2-0.3%. It is also expected to spur consumption and ease inflationary pressures.
• S&P Upgrade: S&P upgraded India's sovereign rating to BBB (stable) after 18 years, citing the country's growth resilience and fiscal prudence.
• Low Inflation: Consumer Price Index (CPI) inflation dropped to a 97-month low of 1.55% in July 2025, creating room for potential rate cuts by the Reserve Bank of India (RBI).
• Strong Services Sector: The services sector remains robust, with the Services Purchasing Managers' Index (PMI) reaching a 15-year high of 62.9 in August.
• Infrastructure Development: India's investment and economic focus is shifting towards "hard assets" like infrastructure, real estate, and renewable energy. The 2025 budget allocated over $125 billion for public infrastructure capex, supporting projects in connectivity, logistics, renewable energy parks, and high-speed rail.

Challenges and Concerns

Despite the positive outlook, India faces certain challenges:

• High US Tariffs: India faces steep tariffs on exports to the U.S., particularly impacting sectors like textiles, auto components, and leather.
• Foreign Portfolio Investor (FPI) Outflows: Foreign portfolio investors withdrew USD 4 billion in August, marking the largest monthly outflow in seven months.
• Flood Damage: Severe floods in Punjab have damaged crops across a large area, raising concerns about rural incomes.
• Trade Deficit: The merchandise trade deficit widened to USD 27.4 billion in July, the highest in eight months, while urban demand remains somewhat fragile.
• Global Volatility: The market is subject to global volatility, with the near-term picture clouded by tariffs and FPI outflows.

Expert Insights

Inderbir Singh Jolly, CEO of PL Wealth Management, believes that India's structural growth story remains intact, with reforms, capex momentum, and low inflation providing strong tailwinds. He suggests that long-term investors should use market volatility to build exposure to quality companies.

Investment Opportunities

PL Wealth sees significant opportunities in high-quality large-cap companies and selectively researched mid- and small-cap stocks. They recommend a neutral stance with a positive bias at the long end, suggesting selective additions in Government Securities (G-Secs) and State Development Loans (SDLs).

Rupee Outlook

The Indian Rupee (INR) is expected to remain in the 87.5-88.5/USD range in the near term, with medium-term stabilization projected in the 86-88/USD range. However, further escalation in tariffs could potentially push the currency closer to 90/USD.

Wealth Creation

India's wealth creation is on the rise, with the number of dollar millionaire households (net worth of Rs 8.5 crore and above) nearly doubling from 4.58 lakh in 2021 to 8.71 lakh in 2025. This translates to approximately one new millionaire household every 30 minutes.