India’s capital expenditure from FY25-30 is expected to pivot from public-led transport infrastructure to a more balanced investment in energy infrastructure, which includes electricity generation and the integration of power grids for efficient transmission and distribution, according to BNP Paribas report.
India’s economy is expected to remain resilient despite global trade uncertainties and shifting monetary policies. Larger economies like China, India, and the US tend to be less reliant on external trade, making them relatively insulated from the economic risks associated with tariff wars. India’s inward-focused economy is likely to experience less volatility in trade compared to smaller, trade-dependent nations.
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The US 10-year bond yield has increased from 3.7 per cent in September 2024 to 4.5 per cent currently, while India’s 10-year yield has remained relatively stable, fluctuating between 6.7 per cent and 6.9 per cent. This has significantly narrowed the yield gap, contributing to a 3 per cent depreciation of the Indian Rupee (INR) since September 2024. BNP Paribas economists anticipate that US inflation will continue to face upward pressures, preventing any rate cuts in 2025.
Meanwhile, the Reserve Bank of India (RBI) may lean towards rate cuts to support economic growth, further compressing the yield gap and exerting downward pressure on the INR. Both consumer staples and industrials in India are trading at a premium compared to their historical valuation averages and against other emerging markets. While industrials have gained from India’s strong manufacturing momentum, consumer staples are expected to undergo a period of time correction. Strong capital expenditure (capex) momentum is expected to continue, especially in energy infrastructure. Infrastructure investments, particularly in energy, are expected to remain robust.
The healthcare sector is projected to see steady revenue growth, with an expected aggregate growth rate of 10 per cent and an EBITDA margin of 27 per cent in FY26. Pharma companies may face revenue losses as certain one-off opportunities diminish by the end of 2025. New approvals and product integrations will be crucial factors to watch. While US tariffs on Indian healthcare products remain a possibility, they are unlikely due to the US’s heavy reliance on Indian pharmaceutical supplies.