Macro Economy and Trade - Newspaper Summary

 The sources provide a detailed snapshot of India's Macro Economy and Trade landscape in October 2025, heavily influenced by global geopolitical tensions, shifting domestic policies, and rapid technological acceleration.

Macro Economy and Trade Performance (October 2025)

Trade Dynamics and US Tariffs

India's merchandise exports demonstrated resilience in September 2025, growing 6.7% year-on-year to reach $36.38 billion. This increase is considered notable given the challenging global environment. Despite this overall growth, exports to the United States (US) showed a decline of 11.9% in September.

The downturn in US shipments is attributed to the additional 25% tariff imposed by the US government on Indian goods, reportedly linked to New Delhi’s oil purchases from Russia. This brought the total levy on Indian exports to 50%, effective since August 27. This high tariff is expected to adversely impact nearly half of India’s exports to the US, particularly in labor-intensive sectors such as garments, leather, gems, and jewellery. Consequently, the US’s share in India's total exports fell to just 15% in September, down from over 20% earlier in the year.

The commerce secretary noted that Indian exporters have performed well despite these headwinds, reflecting optimism for a future Bilateral Trade Agreement (BTA) with the US that might ease these levies.

Widening Trade Deficit and Imports

Despite resilient exports, India’s merchandise trade deficit widened significantly in September 2025 to a 13-month high of $32.15 billion. This widening deficit was largely fueled by surging imports, particularly gold imports, which nearly doubled to $9.6 billion in September, up from $4.6 billion in August. Overall imports rose to $68.53 billion in September from $61.59 billion in August. The combined deficit in goods and services for September widened to $16.61 billion.

Monetary Policy and Currency

India’s Monetary Policy Committee (MPC) unanimously voted to keep interest rates unchanged earlier in October 2025, opting to "keep the powder dry" for future cuts. This caution stems from "elevated uncertainty on the external front", as members prefer to wait for the full transmission impact of prior monetary easing (100 basis points of repo rate cuts since February, including a 50 bps cut in June) and fiscal measures, such as GST cuts.

The MPC simultaneously raised the FY26 growth forecast to 6.8% (up from 6.5%) and cut the FY26 inflation forecast to 2.6% (down from 3.1%).

In currency markets, the rupee bounced back sharply, closing at 88.06 against the US dollar on October 15, 2025, posting its biggest intraday gain in nearly four months, supported by optimism regarding India-US trade talks and likely intervention by the RBI.

Macro Economy and Trade in India's Socio-Economic and Tech Landscape

The trade and macro figures are intertwined with specific socio-economic and technological developments across India:

Geopolitical Trade-Offs in the Energy Sector

The US tariffs create direct pressure on India's energy sourcing strategy. India imports, on average, $12–13 billion worth of crude oil and gas from the US yearly, with headroom for an additional $12–13 billion in purchases.

A senior government official confirmed India is open to increasing imports of American oil and gas if prices remain competitive. However, analysts suggest that securing a trade deal might eventually require India to halt imports of Russian oil, especially since the price gap for Russian crude is narrowing. A US Treasury Secretary stated that India is expected to shift its energy imports away from Russia, asserting that such purchases are sustaining Russia’s war efforts.

Consumer Spending and Fiscal Policy

Domestic consumer sentiment shows improvement, aiding economic activity. Urban consumers are increasing discretionary spending, driven by a calmer inflation outlook and recent GST rate cuts (implemented on September 22). Retail consumption at mall operators grew 13% year-on-year in Q2FY26.

In terms of fiscal accountability, India's anti-profiteering regime (DGAP), introduced with GST to ensure price reduction benefits reached consumers, is currently winding down after ceasing acceptance of new complaints in April 2025.

Technology and Infrastructure Investment

The future economic context is highly linked to technological investments and the need for corresponding infrastructure:

1. AI Data Center Boom and Energy Demands: Big Tech firms are rapidly investing in AI infrastructure, exemplified by Google's announcement to invest $15 billion in an AI data center hub in Visakhapatnam. This capital influx is driven by AI’s massive data consumption needs. However, the anticipated exponential demand for data centers is expected to exert enormous pressure on India's power supply (e.g., a single 1GW facility could use half of Mumbai's power demand). The sources stress the need for R&D and a quick transition to clean electricity to prevent this surge in energy consumption from compromising India's climate progress, given that two-thirds of the electricity still comes from coal.

2. Automotive Sector Challenges: Global trends indicate a retreat from aggressive EV targets due to economic realities, profitability concerns, and high battery costs. Reflecting this, Hyundai is committing $5 billion to India but is shifting its focus to include hybrid vehicles, acknowledging that the EV market is not growing as expected. Domestically, Tata Motors' e-bus sales sharply declined (80% drop) partly due to the rare earth magnet crisis, a global supply chain issue tied to China clamping down on exports of critical inputs used in permanent magnets for EV motors.

3. Digital Assets and Finance: The cryptocurrency sector remains buoyant, with Bitcoin surging 90% over the past year in dollar terms, viewed by many as "digital gold". India maintains a strict tax regime on crypto (30% tax, 1% TDS). Despite this, adoption is high, with 119 million crypto holders. Local exchanges like CoinDCX (valued at $2.45 billion) are raising funds for global expansion and diversifying into new Web3 solutions.

Socio-Economic Disparities and Fiscal Health

The economic narrative remains tempered by structural socio-economic challenges, particularly in states like Bihar, identified as India’s poorest. Bihar faces mass migration due to low job creation. Political parties are making cash transfer promises ahead of the elections, incurring massive estimated costs (up to ₹30,000 crore annually). This short-term spending risks exacerbating Bihar's revenue-to-capital expenditure ratio, which prioritizes immediate consumption over long-term asset creation and job growth. The national unemployment rate for those aged 15 and above also edged up slightly to 5.2% in September 2025.