2025 was a roller‑coaster year for investors, with big policy shifts abroad and bold moves at home that changed how markets behaved.
US raises tariffs, sparking trade tension
In April, the United States announced a new protectionist trade policy. It increased tariffs on steel and aluminium and added a 26% duty on many Indian products. The goal was to protect US industries, but the move pushed up costs for manufacturers and consumers worldwide.
India’s response and new trade partnerships
India pushed back by looking for new partners. In July, it signed a Comprehensive Economic and Trade Agreement with the United Kingdom, removing most Indian export duties to the UK and promising to cut UK import duties on Indian goods. The pact aims to double bilateral trade by 2030.
When the US tariffs took effect in August, about two‑thirds of India’s US exports faced a 50% combined duty, prompting Indian exporters to diversify their markets and speed up negotiations with other countries.
Foreign portfolio flows in and out
- April saw a brief inflow of ₹4,223 crore from foreign institutional investors (FIIs) as global markets steadied.
- Later in the year, rising geopolitical risk and trade worries led to net outflows of roughly ₹1.6 lakh crore by late December.
- Domestic investors helped keep Indian equities stable despite the swings.
Major domestic reforms
- Union Budget 2025‑26: Raised the personal income‑tax exemption to ₹12 lakh, aiming to boost middle‑class spending and keep fiscal discipline.
- GST overhaul: Simplified tax rates, cut the number of slabs, and made input‑tax credit easier, especially for small and medium businesses.
- Retail inflation: Dropped to 0.25% YoY in October, the lowest since 2012, mainly because of lower food prices and GST cuts.
RBI’s monetary easing
In December, the Reserve Bank of India cut its repo rate by 25 basis points to 5.25%, the fourth cut of the year. The move was backed by falling inflation and strong growth. The RBI also bought ₹2 lakh crore of government bonds and set up a $10 billion rupee‑swap to keep liquidity flowing.
Economic performance
GDP growth accelerated to 8.2% in Q2 FY25‑26, the fastest in six quarters, and the RBI lifted its FY26 growth outlook to about 7.3% while keeping inflation near the lower end of its 2‑6% target.
What this means for everyday investors
— Keep an eye on how US tariff changes affect import‑dependent sectors.
— Look for opportunities in companies that benefit from the India‑UK trade deal or are expanding into new export markets.
— Benefit from lower inflation and a supportive monetary policy, which can improve real returns on fixed‑income assets.
Remember, this is perspective, not a prediction. Do your own research before making any investment decisions.