India’s capital expenditure from FY25-30 is expected to transition from public-led transport infrastructure to a more balanced investment approach, with a significant focus on energy infrastructure. This includes electricity generation and enhanced power grid integration for efficient transmission and distribution, according to a BNP Paribas report.
Despite global trade uncertainties and fluctuating monetary policies, India’s economy is expected to remain resilient. Larger economies such as China, India, and the US are less dependent on external trade, making them more insulated from economic risks linked to tariff wars. India’s inward-focused economy is likely to experience lower trade volatility compared to smaller, trade-dependent nations.
The US 10-year bond yield has risen from 3.7% in September 2024 to 4.5% currently, while India’s 10-year yield has remained stable, fluctuating between 6.7% and 6.9%. This narrowing of the yield gap has contributed to a 3% depreciation of the Indian Rupee (INR) since September 2024.
BNP Paribas economists predict that US inflation will continue to face upward pressures, preventing any potential rate cuts in 2025. Meanwhile, the Reserve Bank of India (RBI) may consider rate cuts to support economic growth, further compressing the yield gap and putting additional downward pressure on the INR.
In equity markets, both consumer staples and industrials in India are trading at a premium compared to historical valuation averages and other emerging markets. While industrials have benefited from India’s strong manufacturing momentum, consumer staples are expected to undergo a time correction.
The strong capital expenditure (capex) momentum is expected to continue, particularly in energy infrastructure, where investment remains robust.
The healthcare sector is projected to experience steady revenue growth, with an estimated aggregate growth rate of 10% and an EBITDA margin of 27% in FY26. However, pharmaceutical companies may face revenue losses as one-off opportunities diminish by the end of 2025. Going forward, new product approvals and integrations will be key factors to monitor.
While there is a possibility of US tariffs on Indian healthcare products, they are considered unlikely due to the US’s strong dependence on Indian pharmaceutical supplies.