HSBC Global Research expects India’s GDP growth to accelerate to 6.5 per cent in fiscal year 2025-26 from 6.2 percent forecast for the current fiscal, Frederic Neumann, Managing Director, Chief Asia Economist and Co-Head of Global Research Asia has said. 

“India is one of the least exposed economies to global headwinds, that is, to tariffs being imposed potentially by the US on imports from China to a US Fed arguably as well being a bit more hawkish. It does weigh in on INR but not necessarily a big stumbling block for India”, Neumann said, releasing details of the HSBC Asian Outlook 2025. 

Neumann also said that few smaller economies in Asia such as Vietnam and Philippines performing well, but “India will certainly continue to top the league”. 

Neumann expects Indian economy to stabilise over the course of this year — all because the country is not all exposed to exports. 

India’s Central Statistical Office (CSO) recently pegged the first advance estimate for 2024-25 growth at 6.4 per cent, lower than the 6.5 per cent estimate of the Finance Ministry and 6.6 per cent by the Reserve Bank of India (RBI). 

Herald Van der Linde, Head of Equity Strategy, Asia Pacific, HSBC Global Research expressed a cautious note on Asian equity markets, noting that strong US dollar is not good for Asian equities. Also economic growth has not been that strong in Asian economies in last few years. 

“We are neutral on India. Because the story in India is almost as opposite to the rest of the region as growth in region is slowing”, Linde said. 

On Nifty expectations over the course of the year, Linde highlighted that India is a market that was downgraded by HSBC recently from an overweight to neutral position.

“What we are now seeing is sense of moderation in earnings growth coming out in market. This is driven by base effects and interest rates being relatively high. Earnings growth is now settling at lower pace. We are worried actually as there is reset taking place.

“At the moment earnings growth rate is about 17 per cent, we see it going down to 15 per cent,” he said, adding that he expects to see more downgrades.

Joey Chew, Head of Asia FX Research, HSBC Global Research said that the challenges for Asian currencies are obvious in terms of strong US dollar. It is going to be another tough year for Asian currencies with across the board depreciation against the US dollar, she said. 

On US tariff risk being faced by China, Chew said that HSBC is working with assumptions that tariffs will be imposed, but may not go all the way to 60 per cent as being discussed earlier. 

Chew highlighted that India has relatively high inflation compared to its trading partners.

So, if the nominal exchange rate does not keep up with trading partners, the real effective exchange rate would rise even faster. This is unwelcome when India’s growth is slowing down and FDI competition is there globally.

“Going forward our expectation is that we will see rupee continue down this path as long as the US dollar is quite strong and as long as we see lack of inflows. In 2022-23 and 2023-24, India got lot of equity inflows and bond inflows. That is starting to change. Bond inflows are expected to slow as period of index inclusion ends in March this year. After that we should get less systematic but more tactical type of allocations on bond inflows”, Chew added. 

Meanwhile, HSBC Global Research said in its latest quarterly Economic Research report that India is on track to become the third largest economy in the world by 2027, behind the US and China. 

India’s economy is poised to more than double from $3.4 trillion in 2022 to $7.5 trillion by 2032, if real growth averages 6.5 per cent a year, but could hit $8 trillion by 2032, if growth increases to 7.5 per cent a year, report added.