GFL Ltd Management Discussions

Indian economic overview

India displayed steady economic growth amidst significant challenges to global economic stability arising due to geopolitical tensions, ongoing conflicts and trade policy risks. As per the first advance estimates of national accounts, Indias real GDP is estimated to grow by 6.4 per cent in FY25. Growth in the first half of FY25 was supported by agriculture and services, with rural demand improving on the back of record Kharif production and favourable agricultural conditions. The manufacturing sector faced pressures due to weak global demand and domestic seasonal conditions. Private consumption remained stable, reflecting steady domestic demand. Fiscal discipline and strong external balance supported by a services trade surplus and healthy remittance growth contributed to macroeconomic stability. Together, these factors provided a solid foundation for sustained growth amid external uncertainties.

The RBI and the IMF have projected that Indias consumer price inflation will progressively align towards the inflation target in FY26. In the December 2024 RBIs Monetary Policy Committee report revised its inflation projection from 4.5 per cent to 4.8 per cent in FY25. Assuming a normal monsoon and no further external or policy shocks, the RBI expects headline inflation to be 4.2 per cent in FY26. IMF has projected an inflation rate of 4.4 per cent in FY25 and 4.1 per cent in FY26 for India.

India has shown good results as far as Inflation management is concerned. The supply disruptions inflicted by the pandemic and increased commodity prices caused by heightened global conflicts markedly affected India. As a result, FY22 and FY23 witnessed price pressures in core consumer goods and services. Food prices were affected by adverse weather conditions in the last two years. The net impact of these developments was elevated inflationary pressures in FY23 and FY24. Prudent monetary policy response and calibrated trade policy measures by the Government, coupled with strong output growth, helped reduce core inflation to a four-year low in FY24.

On the domestic front, rebounding rural demand augurs well for consumption. Investment activity is expected to pick up, supported by higher public capex and improving business expectations. Capacity utilisation in manufacturing remains above the long-term average, and private sector order books have shown steady growth, alongside a rise in investment intentions. However, these gains could be tempered by the global excess capacities in sectors such as steel, leading to aggressive trade policies in search of demand.

There are many upsides to domestic investment, output growth and disinflation in FY26. There are equally strong, prominently extraneous, downsides too. Nonetheless, the fundamentals of the domestic economy remain robust, with a strong external account, calibrated fiscal consolidation and stable private consumption. On balance of these considerations, the growth in FY26 is expected to be between 6.3 and 6.8 per cent. Navigating global headwinds will require strategic and prudent policy management and reinforcing the domestic fundamentals. The Budget 2024-25 laid out a multisectoral policy agenda for sustained growth push. This would require deregulation and reforms at the grassroots level to improve the overall competitiveness of the economy and to lift trend growth rates, supporting higher levels of economic activity.

The Indian M&E sector, which contributes 0.73% to Indias GDP, continued to grow in 2024, albeit at a relatively modest 3.3%; it grew by INR81 billion to reach INR2.5 trillion (US$29.4 billion). Digital media overtook television for the first time to become the largest segment, contributing 32% of M&E sector revenues. Outside the Home Media (comprising filmed entertainment, live events and OOH media) grew at a combined 3%, and now contribute 14% of the total M&E sector while New Media (comprising digital media and online gaming) grew INR113 billion (12%) and now comprise 41% of the M&E sectors revenues. However, Core traditional media (television, print, radio and music) together saw their revenues drop by (-)3% or INR30 billion, and their share of the total M&E sector fall to 41%

Source- EY FCCI, M&E Report 2025 titled “Shape the future: Indian media and entertainment is scripting a new story”

In 2024, Digital Media demonstrated tremendous growth followed by Live Events and Out-of-Home Media. However, the filmed entertainment segment experienced negative growth of 9% compared to previous year while Animation & VFX along with Television also registered negative growth of 11% and 32% respectively.

The Media and Entertainment (M&E) sector in India is expected to maintain its growth trajectory, and is expected to grow at a CAGR of 7% to reach INR3.07 trillion (US$36.1 billion) by 2027 led primarily by growth in Outside the Home Media (comprising filmed entertainment, live events and OOH media) and New Media (comprising digital media and online gaming).

It is anticipated that this segment will continue to grow, at a CAGR of 4.3% to INR 213 billion by 2027, led by increased affluence, more high-quality mass content, and innovations in pricing, infrastructure and distribution.

The total screen count was estimated at 9,927, which is around 1.86% higher compared to previous year according to UFO Moviez estimates. Notably, the screen count has surpassed 2018 levels.

The industry would undergo changes in the coming times and reinvention would be a core theme across different channels, content types and operational models. In 2024, total of 1,823 films released in theatres, 1.48% higher than in 2023.

As per the Report, the shortening of digital windows to four weeks in many cases has led to the cost-conscious audience segment willing to wait for films that do not receive a high rating or positive social media reaction. The Report also suggested that approximately, only 6% of Indias population enter any cinema hall in a year, due to lower-cost alternatives like OTT and TV being available to large parts of the population.

The period since the pandemic has seen a surge in individual and household participation as capital market investors through direct (trading in markets through their accounts) and indirect (through mutual funds) channels. Healthy corporate earnings, stable macro fundamentals, efficient and robust technology architecture facilitating efficient trading, clearing, and depository systems, and trust garnered by mutual fund ecosystem and online digital investment platforms have encouraged greater participation in capital markets.

The mutual fund industry has grown well in the last few years and is now crucial in channelling financial savings towards risk capital formation and leveraging technology and innovation. The total number of folios (excluding FoF domestic schemes) increased to 23.45 Cr in March 2025), and retail investors held mutual fund units worth P18.6 lakh crore. This surge in participation, coupled with strong market performance, has led to a remarkable increase in mutual funds assets under management (AuM), which rose to ? 65.74 Cr as on March 2025 registering 25.3 per cent growth from March 2024.

The mutual fund segment presently has more than 10 crore Systematic Investment Plan (SIP) accounts, with cumulative SIP inflows of P10.9 lakh crore since inception. Monthly average gross SIP flows have more than doubled in the last three years, from P0.10 lakh crore in FY22 to P0.26 Lakh Crore in March 2025 in FY25. Aided by these sustained inflows, mutual fund ownership in Indian listed companies has risen to a fresh all-time

high of 9.5 per cent43 in the quarter ending September 2024, from 8.7 per cent in FY24.

Elevated valuations and optimistic market sentiments in the US raise the likelihood of a meaningful market correction in 2025. Should such a correction occur, it could have a cascading effect on India, especially given the increased participation of young, relatively new retail investors. Many of these investors that have entered the market post-pandemic have never witnessed a significant and prolonged market correction. Hence, if one were to occur, its impact on sentiment and spending may be nontrivial.

Deepening individual participation, coupled with robust gains generated by Indian equities, outpacing other asset classes, has created significant household wealth over the last few years. As per the NSEs estimates, household wealth in Indian equities has increased by over P40 lakh crore in the last five years. Even as the resilience demonstrated by the Indian market, supported by growing retail participation, is promising, the risks associated with a potential US market correction cannot be overlooked, given historical trends. Evidence shows that changes in the US market are a leading indicator for the Indian market, especially during shocks, while the reverse is not true. This emphasises that Indian markets tend to react more to trends originating in the US, reinforcing the need for caution in the event of a downturn in the latters stock market.

# Source: Economic Survey 2024-25 (https://www.indiabudget. gov.in/economicsurvey/doc/echapter.pdf)