SG Finserve Ltd Management Discussions

Economic Overview

The global economy in 2025 recorded steady but moderate growth of around 3.3%, reflecting resilience despite persistent macroeconomic challenges. Advanced economies expanded at a slower pace due to tight monetary policies, while emerging markets drove growth on the back of strong domestic demand and industrial activity. Infiation moderated to nearly 4.2% globally, though it remained above target levels, keeping interest rates elevated.

Global trade stayed subdued amid geopolitical tensions and supply chain realignments. Financial conditions remained tight but stable, with cautious lending, elevated bond yields, and improving equity markets, shaping investment flows and risk management across sectors.

Indias economy in FY 2025-26 demonstrated strong resilience and momentum, supported by stable macroeconomic fundamentals, policy support, and broad-based sectoral growth. Real GDP is estimated to grow at 7.4% in FY 2025-26, with Gross Value Added (GVA) expanding by 7.3%, indicating sustained economic strength despite global uncertainties. Infiation moderated sharply, with headline CPI averaging 1.7% during April–December 2025, marking one of the lowest levels in recent years.

Monetary conditions turned supportive, with the repo rate reduced by 100 basis points to 5.25% by December 2025 and the Cash Reserve Ratio (CRR) lowered to 3.0%. The RBI infused liquidity exceeding D3.39 lakh crores through open market operations and forex measures, while maintaining a surplus liquidity of an average of D1.89 lakh crores. Broad money supply (M3) grew by 12.1%, while the money multiplier improved to 6.21, reflecting enhanced financial intermediation.

Industrial growth strengthened to 6.2%, with manufacturing emerging as a key driver, recording GVA growth of 11.5% in FY 2025-26. Government-led PLI schemes attracted investments exceeding D2 lakh crores, generating production worth D18.7 lakh crores and creating over 12.6 lakhs jobs. Core sector performance remained strong, with cement growing by 13.5%, steel by 6.9%, electricity by 5.3%, and IIP rising by 7.8% in December 2025. The services sector continued to lead growth, expanding by 9.1%, contributing 53.6% to GDP and 56.4% to GVA, reflecting the increasing dominance of services in the economy.

Following the bilateral trade deal, the US reduced tariffs on Indian goods from a peak of 50% to an effective 18%, marking a significant de-escalation in trade tensions. Earlier, over 55% of Indias D8.35 lakh crores in exports to the US were affected by layered duties, including a 25% reciprocal tari_ and a 25% punitive tari_. The new agreement removes the entire 25% punitive levy and lowers the reciprocal tari_ to 18%. In return, India has committed to reducing tariffs on US goods, easing non-tari_ barriers, and facilitating imports of over D42.5 lakh crores, thereby strengthening bilateral trade prospects and export competitiveness.

Foreign exchange reserves remained robust at D59.6 lakh crores, covering around 11 months of imports and over 94% of external debt. Remittance inflows stood at D11.5 lakh crores, supporting domestic consumption and external stability. Fiscal performance improved, with revenue receipts rising to 9.2% of GDP and effective capital expenditure increasing to 4% of

GDP. GST collections reached D17.4 lakh crores during April–December 2025, growing 6.7% year-on-year. The financial sector remained robust, with bank credit growth accelerating to 14.5% year-on-year in December 2025, compared to 11.2% a year earlier. MSME credit grew by 21.8%, with micro and small enterprises expanding by 24.6%. Asset quality improved significantly, with gross NPAs declining to multi-decadal lows, while capital adequacy remained strong at 17.2%. Profitability indicators were healthy, with return on equity at 12.5% and return on assets at 1.3%.

Capital markets witnessed strong activity, with resource mobilisation of D10.7 lakh crores in FY 2025-

26 (till December 2025), while household participation increased, with equity ownership rising to 18.8% and financial savings in market-linked instruments reaching 15.2%. The Financial Inclusion Index improved to 67.0, indicating deeper penetration of financial services across the economy.

Indias rural and semi-urban economy in FY 2025–26 is witnessing a strong recovery, marked by improved agricultural output, rising consumption, and expanding financial inclusion. A robust kharif harvest and 3.6% growth in agricultural GVA have supported income stability, while allied sectors such as livestock and _sheries continue to diversify rural earnings. This has translated into stronger demand for consumption, contributing to a 7% increase in private final consumption expenditure, which now accounts for over 60% of GDP.

Employment conditions have also improved, with rural unemployment declining to 3.9% and reduced dependenceonMGNREGSindicating a shift toward more sustainable livelihoods. Simultaneously, deeper financial inclusion through widespread Jan Dhan accounts, a resilient microfinance ecosystem, and improving asset quality in regional rural banks are strengthening credit access. Enhanced digital penetration, near-universal 5G coverage, infrastructure initiatives such as SVAMITVA, and improved regional connectivity are further transforming rural markets, making them more integrated, productive, and growth-oriented. Looking ahead, the outlook for FY 2026-27 remains positive, with GDP growth projected at 6.8–7.2%, supported by sustained domestic demand, infrastructure investment, and continued policy support. Infiation is expected to remain moderate, with RBI projections at 3.9 to 4.0% in the first half of FY 2026-27 and IMF estimates at around 4.0% for the year. The macroeconomic environment is expected to remain stable, with strong external bu_ers, improving fiscal consolidation, and a well-capitalised financial system. Continued focus on capital expenditure, digitalisation, and financial inclusion is likely to sustain credit growth and investment activity.

(Source: Press Information Bureau)