India’s capital expenditure from FY25-30 is projected to shift from a public-sector-driven focus on transport infrastructure to a more balanced investment strategy, with greater emphasis on energy infrastructure. This includes advancements in electricity generation and enhanced power grid integration to improve transmission and distribution efficiency, according to a BNP Paribas report.
Despite uncertainties in global trade and evolving monetary policies, India’s economy is expected to remain resilient. Major economies such as China, India, and the US are generally less dependent on external trade, making them more insulated from the economic risks posed by tariff wars. Given India’s inward-oriented economic structure, it is likely to experience less volatility in trade compared to smaller, export-driven nations.
The yield on the US 10-year bond has risen from 3.7 percent in September 2024 to 4.5 percent currently, while India’s 10-year yield has remained relatively stable, fluctuating between 6.7 percent and 6.9 percent. This narrowing yield gap has contributed to a 3 percent depreciation of the Indian Rupee (INR) since September 2024.
BNP Paribas economists anticipate continued inflationary pressures in the US, which could prevent any rate cuts in 2025. Meanwhile, the Reserve Bank of India (RBI) may consider reducing interest rates to support economic growth, further narrowing the yield gap and adding downward pressure on the INR.
Both the consumer staples and industrials sectors in India are trading at a premium relative to their historical valuation averages and compared to other emerging markets. While the industrial sector has benefited from India’s robust manufacturing momentum, consumer staples are likely to experience a period of time correction.
The strong momentum in capital expenditure (capex) is expected to persist, particularly in energy infrastructure. Investments in this sector are anticipated to remain strong.
The healthcare industry is projected to maintain steady revenue growth, with an expected aggregate growth rate of 10 percent and an EBITDA margin of 27 percent in FY26. However, pharmaceutical companies may face revenue declines as certain temporary revenue opportunities phase out by the end of 2025. Future growth will depend on new approvals and product integrations.
While the possibility of US tariffs on Indian healthcare products exists, they are considered unlikely due to the US’s significant dependence on Indian pharmaceutical supplies.
