India’s economy may be shifting from speed to strength – and that’s a win

SINGAPORE – In mid-November 2025, when India’s Hero Motocorp, the world’s largest manufacturer of motorcycles and scooters, reported strong performance for the quarter ending Sept 30, many saw it as a flash in the pan.

It was well known that while the Indian economy had settled into a quick trot, consumer demand was uneven and top-loaded – expensive cars and condos were seeing strong demand, while purchasing power in the hinterland, where the majority of Indians live and buy goods like two-wheeled vehicles, had been soft for the past few years.

But record December-quarter earnings reported in January by TVS Motor, another two-wheeler giant, prompted market watchers to sit up and take notice. While income tax trims early in 2025, and a consumption tax cut in September no doubt played a part, it appears that rural demand is indeed reviving.

And that can only spell good news for India’s US$4.2 trillion (S$5.4 trillion) economy, which in 2025 passed Japan to emerge as the world’s fourth-largest.

“We see the spurt in the health of our loan books and revival of demand for credit,” says a top banker at a prominent microfinance lender. “Both rural and urban segments are ticking over nicely, and there is a clear lift in rural purchasing power.”

A National Bank for Agriculture and Rural Development survey found that 42.2 per cent of rural households saw their incomes grow in 2025, with about 80 per cent of households reporting higher consumption.

A recent survey of 30 chief executives conducted by the respected Business Standard financial daily found that more than eight in 10 of them had plans to make fresh investments or expand capacity in 2026.

Official government projections are for the economy to finish the fiscal year to March 31 with 7.4 per cent growth, improving from the previous year’s 6.5 per cent. But since the economy clocked 8.2 per cent in the fiscal second quarter ended Sept 30, 2025, this would suggest a deceleration in the second half of the fiscal year.

Indeed, the central bank’s new forecast is for 6.8 per cent growth in the fiscal year to March 2027.

But while growth rates undoubtedly are important markers, it is the broad-based improvement shared by the banker – particularly the improvement in rural demand – that is worth tracking where India is concerned.

If accurate, it suggests that growth is trickling down in what is by any yardstick a highly unequal society, with too much wealth and buying capacity concentrated at the top of the pyramid.

That purchasing power is improving in a wider section of people is also a morale booster for a country that in 2025 suffered a series of setbacks. 

Punitive tariffs

imposed by the Trump administration

led to significant job losses in jewellery, garments and marine sectors. US presidential trolling of India as a “dead economy” triggered nervousness in foreign portfolio investors, which also weighed on the rupee. 

There have also been questions about the quality of Indian data raised by the International Monetary Fund and some economists.

But the empirical evidence now showing up is hard to ignore – even from this distance – and Singaporeans should take note of this growth pole. All the more given the wheeze in big regional economies such as Indonesia’s and Thailand’s, and persistent concerns about China. 

Prospects of broad-based growth in India spell good news for companies such as DBS Bank, Sembcorp, Singtel and CapitaLand – all of which have significant presence in that economy either directly or via significant stakes in key Indian companies. Indeed, the India market has been Singapore investment company Temasek’s top-performing portfolio over the past decade.    

Brisk, all-round growth should also be a political boost for Prime Minister Narendra Modi, who came to power as a development-oriented leader but whose first decade in office could not deliver the growth rates achieved by the predecessor government of Dr Manmohan Singh. 

A demonetisation exercise early in his tenure is widely acknowledged to have hurt the cash-driven rural economy, and just as it was recovering from that setback, the lockdowns of the Covid-19 pandemic hammered it again. But there have been significant improvements in infrastructure all along, and the central bank has presided over a sustained clean-up of banks. Inflation is under control, and the government has lately made labour laws more investor-friendly. 

And even Mr Modi’s worst detractors have to concede he has delivered stability for his nation in a neighbourhood where upheaval is all too common – just witness the eruptions over the past five years in Pakistan, Sri Lanka, Bangladesh and Nepal. 

If anything, Mr Modi’s hand has been strengthened by

a string of successes his Bharatiya Janata Party has had in state assembly elections

, helping it erase setbacks delivered by the 2024 national poll which cost the party its standalone majority in Parliament.

Mr Modi’s government is today propped up by two key coalition partners, but you would not be able to tell from the confidence with which he governs, much of it stemming from the evident disarray in opposition ranks.

These – and the Business Standard survey that suggests local private investment is poised to rise – set the stage for steady growth. That would help ease a major domestic headache – youth unemployment.

Abroad, his immediate priority is to get the US relationship back on the rails, without which foreign portfolio investors – who pulled some US$18 billion from Indian stocks in 2025 – will always remain skittish.

Even though domestic investors propped up Indian stocks throughout 2025, stocks fell sharply on Jan 8 because of nervousness in information technology services companies about fewer new orders from the all-important US market, and talk of more tariffs. US President Donald Trump on Jan 7 approved a Bill that

imposes a 500 per cent tariff on goods

imported from countries that buy Russian oil, which includes India.

The turn could come when the long-awaited tariff deal with the US is finally clinched. A deal would bolster the rupee, and returns on Indian investments would not then be crimped when translated into home currencies.

The agreement is delayed apparently because Mr Trump is not satisfied with India’s third and most recent offer, while New Delhi anticipates a significant weakening of Mr Trump’s position in the months to come and sees no gain in conceding too much too soon.

Given India’s multiple challenges over 2025 – including a brief war with Pakistan – New Delhi has handled the economy well enough. Its challenge for 2026 is to make this growth-plus-stability a more enduring feature.