India's FY25 trade deficit widens as imports outpace export growth

Global economic activity in 2024 has been moderate thus far. While higher borrowing costs and tight monetary conditions affected global growth, structural weaknesses are restraining growth in a few major European countries such as Germany, France and Italy, and China. However, the US’ economy continues to exhibit strong growth momentum driven by consumption, the report said.

Foreign Direct Investment (FDI) recorded a revival in FY25, with net FDI inflows rising from $10.4 billion during the first half (H1) of FY24 to $14.3 billion in the corresponding period of FY25, which is 37.6 per cent YoY growth.

India’s net FDI inflows registered remarkable growth in the first five months of FY25. Supported by stable capital inflows, the country’s forex reserves increased by $64.8 billion so far during 2024, the second-largest increase after China amongst major forex reserve-holding countries, said the monthly economic review report by the department of Economic Affairs. “On the external front, India's export recovery may encounter challenges due to softening demand in developed markets,” it added.

Foreign Portfolio Investors (FPIs) became net buyers in the Indian equity market starting in June 2024 after being the next sellers in the first two months of FY25. This trend continued until September 2024, showcasing a clear preference for Indian equities as FPIs injected substantial capital into the market over those months. However, in October, this trend reversed, resulting in a net outflow of $11.5 billion.

“Factors such as concerns about slowing earnings growth, high valuations, rising geopolitical tensions, and recent developments in China led FPIs to withdraw significant funds from Indian equities in October. Overall, due to mixed trends, FPI inflows between April and October 2024 moderated to $10.1 billion, compared to $18.6 billion during the same period the previous year,” it said.

Fibre2Fashion News Desk (SG)