New Delhi: India’s economy posted a striking real GDP growth of 7.8% in the April–June 2025 quarter, reaffirming its status as one of the fastest-growing major economies in the world. Yet, this impressive expansion has failed to translate into enthusiasm among equity investors, who remain wary of subdued corporate earnings, weaker nominal GDP growth, and the ripple effects of recent U.S. tariffs on Indian exports.
Despite robust real growth, nominal GDP growth slowed sharply to 8.8% from 10.8% in the previous quarter. This deceleration signals a moderation in price levels, which, while curbing inflation, has also dampened revenue growth prospects for domestic companies. Among the top 3,000 listed Indian firms, revenue growth has slipped to a seven-quarter low of 3.4%, down from 5.1% previously. Analysts attribute this slowdown to reduced pricing power, slower credit expansion, and rising concerns over asset quality within the banking sector.
Adding to investor caution, the United States recently imposed tariffs of up to 50% on certain Indian goods, including textiles and engineering products. These levies have strained India’s export sectors, widened the trade deficit, and contributed to a withdrawal of approximately $2.4 billion from Indian equities over the past three trading sessions. Investors are weighing these trade tensions against India’s domestic growth, resulting in muted market performance.
The equity markets reflect this cautious sentiment. The Nifty 50 index has risen only 4% year-to-date, trailing several peers in the MSCI Asia index. Key consumer staples companies such as Hindustan Unilever and Colgate Palmolive India have reported tepid or declining revenues, mirroring broader challenges across the corporate sector. Investors appear hesitant to embrace the growth story fully until corporate profitability and trade conditions stabilize.
Experts suggest that structural reforms could help restore investor confidence. Proposed changes, including tax reforms and a Goods and Services Tax (GST) overhaul, are expected to stimulate consumer demand and private investment. Some fund managers view the current market scenario as a potential entry point, anticipating that domestic recovery measures could drive broader market gains within the next 6–12 months.
In conclusion, while India’s economic fundamentals remain strong, corporate headwinds, trade tensions, and cautious investor sentiment continue to overshadow the growth narrative. Policymakers face the dual challenge of sustaining high economic growth while implementing reforms that ensure the domestic corporate sector can translate macroeconomic expansion into consistent profitability and investor confidence.