Indian rupee underperforms in 2025 despite strong macroeconomic fundamentals

It matters to citizens as it provides the official government analysis of macroeconomic performance, policy reforms, and future economic scenarios for the year.

Who it concerns: The Government of India (Ministry of Finance), the general public, investors, and policymakers concerned with India's macroeconomic stability, fiscal consolidation, and global trade dynamics.

What the document says

• The document reports that India achieved a fiscal deficit of 4.8% of GDP in 2025, against a budgeted 4.9%, and set a target of 4.4% for FY26.
• It notes that India received credit rating upgrades from Morningstar DBRS, S&P, and R&I in 2025, with S&P upgrading India from BBB- to BBB.
• The survey states that India anticipates a full-year real growth rate of over 7% for 2025 and another year of real growth at or near 7%.
• It mentions the implementation of significant tax breaks for households in the FY26 budget, the notification of four labour codes, and the opening of the nuclear power generation and insurance sectors to private/foreign investment.
• The document outlines three global scenarios for 2026, assigning a subjective probability of 40% to 45% to a 'managed disorder' scenario where minor shocks escalate into volatility.

Also in the document

• The survey notes that the Indian rupee underperformed in 2025 despite strong macroeconomic fundamentals, attributing this to India's trade deficit in goods and dependence on foreign capital flows.
• It cites the Lowy Institute’s Power Gap Index, stating India’s power gap score is -4.0, the lowest in Asia excluding Russia and North Korea.
• The document records that gold prices rose from USD 2607 to USD 4315 per ounce in 2025, and were at USD 5101.34 as of January 26, 2026.
• It mentions that the US President announced reciprocal tariffs of 25% on India in April 2025 and an additional penal tariff of 25% in August 2025.