Outgoing 2025 was a year of contradictions for the economy, marked by both resilience and strands of fragility. Even as GDP growth kept “surprising” on the upside quarter after quarter, equity and currency markets failed to mirror this optimism. Benchmark indices—the Sensex and the Nifty—clocked single-digit returns, even as the IPO market exhibited unrelenting exuberance.
The rupee saw a roller coaster ride, emerging as one of the worst-performing currencies in Asia, shedding over 5% against the dollar.
The central bank kept pumping liquidity into the economy, delivering a cumulative 125 basis points rate cuts as inflation fell to a decadal low of 0.25% in October. Yet, the government had to step in aggressively in late September with a major GST rate cut to revive consumption.
Corporate profits failed to excite, and foreign portfolio investors (FPIs) continued dumping Indian equities as uncertainty grew over global trade and geopolitical tensions. The $5 trillion economy target remained elusive in 2025, while concerns over inequality, high tax burden and rising cost of living grew louder.
The advent of AI added another layer of disruption to the mix. Here are the top trends of 2025 that shaped the economy and underlined its idiosyncrasies:
Trade disruptions
India failed to conclude the bilateral trade agreement (BTA) with the US. With the US imposing a tariff of 25% initially on Indian goods effective from August 1, followed by an additional 25% punitive levy days later on exports of goods including apparels, textiles, carpets, leather, several exporters were eyeing on the proposed bilateral trade agreement (BTA) for some respite.
India’s exports to the US fell 20.7% from $8.8 billion in May to $7.0 billion in November. The decline was much sharper at 37.7% from May to September, hitting a low of $5.5 billion. From that trough, exports partly recovered by 27.3% between September and November.
Initially, both the countries aimed to have the first tranche of a mutually beneficial, multi-sector BTA by fall of 2025. However, several unresolved market-access issues and shifting global trade priorities slowed negotiations between the two strategic partners. Washington justified its move towards India as a penalty on India for its ongoing imports of Russian crude and the bilateral trade imbalance.
The solace for exporters came in the form of three major FTAs – with the UK, New Zealand and Oman – that the government signed in 2025. The pact with four-nation European bloc ‘European Free Trade Association (EFTA) was also implemented.
Rupee in a free fall
The Indian currency belied the optimism reflected in GDP growth numbers. Despite RBI’s $208 billion-plus war chest against depreciation of rupee, the local currency weakened steadily through the year, hitting record lows and touching 91.14 on December 16.
Barring March and July, rupee depreciated every month, making it the worst-performing currency in Asia and the third-worst globally after Turkish lira and the Argentine peso, which fell 52% and 48%, respectively.
This came even as dollar weakened, with the dollar index hovering around 97, and India’s real effective exchange rate (REER) slipping to a historic low of 95. Rupee closed 2024 at 85.62 and opened 2025 at 85.71. On December 30, it closed at 89.84 against the dollar.
Since May 26, 2014—when the Narendra Modi government took office promising a stronger rupee—the currency has lost 52.72%, sliding from 58.58 to around 90 to dollar. Between December 31, 2024 and December 30, 2025 alone, it depreciated by 5.12%.
Many analysts argue had the RBI not talked down the rupee—partly to cushion exporters from the impact of 50% tariffs—the fall may not have been as steep. Despite this stance, RBI sold a net $31.98 billion between January and October to defend the currency.
GST rate rationalisation
In a major overhaul of the indirect tax regime, the Ministry of Finance restructured the goods and services tax (GST) by rationalising rates and removing compensation cess. The four-slab structure was replaced with just two slabs—5% and 18%. The government said the move would ease compliance, reduce classification disputes and leverage technology for automated processes.
One of the biggest reliefs for consumers was exemption of health and life insurance premiums from GST. While the two-slab structure applies to most goods and services, sin goods such as tobacco products and pan masala continue to attract a higher tax of 40%.
Consumer durables sector emerged as a major beneficiary, with taxes on most white goods came down from 28% to 18%. Though several states flagged concerns over revenue losses, the Centre maintained that long-term fiscal impact would be manageable.
With GST 2.0 implemented in September, gross GST collections rose at a muted pace of 0.7% in November to Rs 1.70 lakh crore, as domestic revenues fell, as per government data.
Silver, gold rally
Precious metals staged their strongest annual rally since 1979. Silver surged over three-fold in dollar terms to $83.62 an ounce on December 26, from nearly $20 at the start of the year, before crashing 15% on December 29. Gold rose 81% to $4,575 an ounce on December 26 and briefly fell 4% on December 29 before recovering over 1% the next day, closing the year with gains of 78%, surpassing the 74% rally seen in 1979.
Most Wall Street analysts see little chance of a meaningful correction in the near term, with gold projected to hit $5,000 an ounce and silver nearing $100 by next December.
The sharp silver correction was triggered by a combination of factors like Chinese curbs on silver exports from January 1, CME Group raising margins by $5,000 to $25,000, and profit-booking.
IPO boom
Dalal Street set several records in 2025. Over 380 companies went public, raising Rs 1.89 lakh crore—Rs 1.76 lakh crore from 105 mainboard issues and the rest from SME listings—surpassing the 2024 record of Rs 1.68 lakh crore. Even as foreign investors pulled out nearly $18 billion from the secondary market, they invested $7.6 billion in primary issues.
The 2025 fundraise was nearly four times that of 2023, when just Rs 54,125 crore was raised. However, listing gains disappointed, averaging only 9.9%—the lowest in a decade—down from 30% in 2024 and 29% in 2023. Only a fraction of IPOs delivered returns above 50%, and many slipped below issue prices within months.
Of the 104 mainboard IPOs, 53 listed with gains, 49 debuted in the red, 67 are currently trading higher, and 35 remained below issue price. Oversubscriptions averaged 26.6x over the past two years.
FPI record selling
FPIs are set to record their highest-ever equity outflows in 2025. Up to December 27, they sold Rs 2.31 lakh crore worth of shares on exchanges. After accounting for Rs 73,583 crore invested in primary markets, net outflows stand at Rs 1.58 lakh crore—the highest since FIIs began investing in India.
The selling was driven by higher US interest rates, a weakening rupee, elevated valuations, profit-booking, and geopolitical risks such as Trump-era tariff threats. The sustained outflows also contributed significantly to the rupee’s sharp depreciation.
Tesla, Starlink India entry
After years of delays, Tesla opened its first showroom in Mumbai on July 15 and later expanded to Delhi-NCR. Vietnamese EV maker VinFast also entered the Indian market.
Contrary to expectations of local manufacturing, Tesla made a cautious entry by importing fully built units and pricing them at a premium due to high import duties. Its Model Y (RWD) was launched at Rs 60 lakh, and going up to Rs 68 lakh for the long-range variant.
Tesla earlier opted out of India’s EV policy that offered lower import duties, dealing a setback to India’s manufacturing ambitions. Meanwhile, Starlink received government approval to operate in India, securing a GMPCS licence. The company is currently conducting trials ahead of a commercial rollout.
Sanctions on Russian crude
Buying Russian oil became significantly harder for India in 2025 due to tighter Western sanctions, US trade penalties and stricter export rules. Imports declined as India pivoted back to traditional suppliers such as Saudi Arabia, the UAE and the US.
In October, the US sanctioned Rosneft and Lukoil, which together accounted for nearly 60% of India’s Russian crude imports, complicating payments and disrupting shipments. Earlier, in August, the US imposed an additional 25% tariff on certain Indian exports over continued Russian oil purchases. New EU rules effective October barred imports of fuels made from Russian crude, prompting refiners like Reliance Industries to halt Russian crude usage.
AI reshapes IT sector
AI proved to be more than a disruptor in 2025, reshaping the IT sector and hitting employment hard. Major firms announced layoffs as they reassessed strategies amid rapid adoption of AI, ML and cloud platforms.
TCS emerged as the biggest newsmaker after allegations of coercive layoffs surfaced. In Q2FY26 alone, it reported a net headcount reduction of 19,755 employees. While the company initially announced plans to cut 2% of its workforce, it later clarified that actual layoffs stood at about 6,500. Infosys and HCL Technologies also cut jobs, citing margin pressures and geopolitical uncertainty. Infosys laid off nearly 800 freshers after internal assessments.
Global data centre hub
Global tech giants ramped up data centre investments in India. Microsoft pledged $17.5 billion, Amazon committed $35 billion over five years, and Google announced a $15 billion data centre in Visakhapatnam with Adani Group and Bharti Airtel. Reliance is building a 1-GW AI-ready facility in Jamnagar using Nvidia chips.
Equinix opened a Rs 564 crore AI-ready data centre in Chennai, while TCS tiedup with TPG to form a $2 billion joint venture, Hypervault, with a 51% stake for TCS. As per reports, US tech majors have pledged $67.5 billion for Indian data centres.