February’s services Purchasing Managers’ Index (PMI) surged to 59, providing relief to investors and policymakers following a GDP growth rise in Q3FY25.
The manufacturing PMI fell to a 14-month low of 56.3 in February, but the overall economy remains in expansion, as a PMI reading above 50 indicates growth.
Despite challenges like capital outflows, both the manufacturing and services sectors, which contribute to 80% of India’s GDP, continue expanding, showing strong economic fundamentals.
Q3FY25 results showed solid net profit growth for most Sensex companies, reflecting ongoing economic resilience.
The potential threat of reciprocal tariffs from the U.S. is a concern for the manufacturing sector, effective from April 2.
The services sector faces disruption from AI-driven solutions, affecting earnings and reshaping hiring and training practices in IT firms.
India's IT sector may grow slower, with growth forecasted at 5.1% in FY25, impacted by AI and global challenges like tariffs and geopolitical instability.
NASSCOM highlights geopolitical upheavals and rising tariffs as major risks for India’s economy.
Both manufacturing and services sectors are dealing with the combined challenges of technological transformation, global protectionism, and the threat of a U.S. recession
The U.S. remains India’s largest trading partner, making any economic disruptions in the U.S. potentially significant for India.
To manage these risks, India must urgently diversify its trade base and reduce dependency on the U.S. market.
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