India's economy, now the world's fifth-largest at $4.1 trillion GDP, is expected to grow 7% annually. Government reforms including monetary easing, tax cuts, and regulatory changes may position financials, metals, and cement sectors for strong growth.

Nippon Life India AMC reports that India has established itself as the world's fifth-largest economy with a GDP of $4.1 trillion and is projected to grow at approximately 7% per annum, potentially maintaining its status as the fastest-growing major economy globally. With one of the world's largest populations dominated by young demographics, India presents both a massive domestic market and a substantial pool of skilled, English-speaking workforce.

Government Reforms Drive Economic Momentum

The past year has witnessed a series of strategic reforms and initiatives designed to strengthen the macroeconomic environment and support financial market growth.

Monetary Policy Easing Measures

India's monetary policy has shifted toward accommodative measures to stimulate economic expansion. The Reserve Bank of India has implemented significant policy changes:

These measures aim to encourage credit growth and reduce borrowing costs. Banks maintain clean balance sheets and willingness to lend, while borrowers continue deleveraging, creating conditions for potential loan growth acceleration to low-to-mid teens on a year-over-year basis.

Fiscal Stimulus Through Tax Reforms

The government announced direct tax reductions in the February Budget and GST cuts in September to boost disposable income and reduce business costs. Early results show promising agricultural growth, expanding credit, and rising auto sales following the GST reduction.

Regulatory and Structural Reforms

India's regulatory reforms focus on improving business ease, attracting foreign investment, and fostering innovation across multiple sectors.

Financial Sector Enhancements

The RBI announced 22 measures to strengthen banking system resilience and competitiveness, including liberalization of the external commercial borrowing framework. SEBI has introduced reforms to expand market participation and enhance investor protection while improving India's global competitiveness.

Business and Investment Facilitation

Key regulatory improvements include:

• Eased foreign direct investment restrictions in insurance and defense sectors
• Consolidation of 29 labor statutes into four simplified Labor Codes
• Expansion of single-window clearance systems through the National Single Window System
• GST simplification with fewer rate slabs and easier filing procedures
• Enhanced MSME support through simplified registration and improved credit access

Economic Recovery Indicators

Consumption Revival

Rural consumption shows improvement through higher tractor sales, reduced MGNREGA demand, and increasing consumer goods volumes, supported by favorable monsoon conditions. The 8th Pay Commission recommendations and arrears could further stimulate consumption in automobiles, consumer durables, and mid-to-low-income housing segments.

India has become the world's second-largest e-commerce market by online shoppers, with strong growth in travel, leisure, SUVs, luxury housing, and quick commerce sectors driven by premiumization and increased formalization.

Capital Expenditure Expansion

India's capital expenditure cycle is expanding into energy transition, defense manufacturing, data centers, semiconductors, and electronics. Policy incentives support these investments aimed at sustainable, resilient, and high-tech growth, with rising private sector participation.

Key Sectors for Focus

Financial Services

Banking and NBFC stocks are expected to demonstrate strong earnings growth, driven by credit recovery, margin expansion, and improved asset quality. Retail loans, mortgages, and MSME credit lead the recovery, while net interest margins benefit from deposit repricing, surplus liquidity, and policy easing.

Metals and Infrastructure

The metals sector could benefit from domestic demand and government policies, with potential catalysts from China's "anti-involution" policy and Five-Year Plan developments.

Cement Industry

Industry consolidation, housing recovery, rural demand revival, government capital expenditure, and operational efficiencies, combined with price increases, are expected to support profitability and sector re-rating.

These comprehensive reforms and favorable economic indicators may position India for sustained growth across multiple sectors, with particular strength expected in financial services, infrastructure, and consumption-driven industries.

India has emerged as a major player in international trade negotiations, successfully concluding seven Free Trade Agreements (FTAs) since 2021 that span across multiple continents and economic regions. These agreements have created new opportunities for exporters and professionals across multiple sectors.

Recent Trade Agreements Expand Market Access

The comprehensive trade expansion strategy has opened new opportunities for Indian businesses, farmers, students, and professionals while strengthening India's position in global value chains. These agreements collectively provide Indian exporters with enhanced market access, reduced tariffs, and improved opportunities across diverse sectors.

New Zealand Partnership Opens Oceania Markets

The India-New Zealand FTA provides Indian exporters with major duty-free access to the New Zealand market while protecting sensitive sectors within India. The agreement extends market reach beyond New Zealand to nearby Oceania and Pacific Island countries, creating opportunities for Indian professionals in IT, engineering, healthcare, education, and construction. Specialized services including yoga instructors, Indian chefs, Ayush practitioners, and music teachers are expected to benefit significantly from enhanced mobility provisions.

Gulf and European Market Integration

The India-Oman Comprehensive Economic Partnership Agreement, signed on December 18, 2025, strengthens economic ties with Gulf partners by providing near duty-free access across textiles, gems, leather, pharmaceuticals, and engineering goods. The agreement enhances services trade and allows full investment in major sectors while creating opportunities for Ayush and wellness exports.

The India-EFTA pact, signed on March 10, 2024, and effective from October 2025, represents a significant milestone with Switzerland, Norway, Iceland, and Liechtenstein. This agreement aims to attract $100 billion in foreign direct investment over 15 years while supporting the creation of one million direct jobs in India.

Established Partnerships Show Strong Results

The India-UAE CEPA, effective from May 1, 2022, has provided preferential market access on over 97% of tariff lines, covering 99% of Indian exports by value. Major benefits have been realized in labour-intensive sectors including gems and jewellery, textiles, leather, footwear, sports goods, and pharmaceuticals. The agreement also opened opportunities across 111 sub-sectors in 11 broad service areas.

The India-Australia Economic Cooperation and Trade Agreement, signed in 2022 as an interim pact, has already shown remarkable results with merchandise trade more than doubling by 2024. Indian exports have grown across textiles, chemicals, agriculture, and specialized products including gold studded with diamonds and turbojets.

Comprehensive Sector Coverage

The India-UK Comprehensive Economic and Trade Agreement, signed in July 2025, removes tariffs on 99% of India's exports to the UK, with major benefits for marine products, textiles, leather, and processed foods. Indian agriculture has gained significantly with most agri-exports now entering the UK duty-free, while services sectors including IT, finance, education, and healthcare have gained greater access.

The India-Mauritius CECPA, signed in February 2021, covers trade in goods, services, investment, and specialized areas like customs, telecom, and financial services. Mauritius provides preferential access on 310 products with Tariff Rate Quotas on 88 products, while Indian service providers access around 115 sub-sectors across 11 broad service categories including professional services, telecommunications, and tourism.