16 Aug 2024Updated: May 2026
The global economic environment in 2025–26 has had direct implications for Indian businesses, NRI investment decisions, and tax planning. Understanding the macro context matters for practical financial decisions — particularly around foreign exchange, overseas remittances, NRI repatriation timing, and the investment case for India-based assets.
India's Economic Position: Strong Domestic Demand, Managed Volatility
India's GDP growth remained in the 6.5–7% range through FY 2025-26, driven by domestic consumption, infrastructure investment, and a resilient services sector. Inflation moderated to the 4–4.5% band, allowing the RBI to maintain a broadly accommodative stance on interest rates while staying watchful of global commodity price pressures and currency volatility.
The INR has remained relatively stable against major currencies in this period, supported by strong FII inflows into Indian equity markets and robust remittance flows from the NRI diaspora. For NRIs, this stability has made the timing of repatriation decisions less volatile than in periods of sharp INR depreciation.
Global Interest Rates and NRI Investment Decisions
The US Federal Reserve's rate trajectory through 2025 — with rates easing from the 2023–24 peak — has had two direct implications for NRIs. First, yields on US dollar savings instruments (treasury bills, money market funds) have come down from their peak, making the relative attractiveness of NRE fixed deposits (exempt from Indian income tax, freely repatriable) more compelling for NRIs looking to park funds in India. Second, lower US rates have reduced the carry cost of maintaining Indian investments — the hedging cost differential that previously discouraged unhedged INR exposure has narrowed.
For NRIs considering property investment in India, the combination of stable INR, moderate interest rates in India (making home loans affordable), and continued real estate price appreciation in major metros makes the asset class relevant for those with a long-term India connection.
Trade Policy and Its Impact on Indian Exporters and SMEs
The global trade environment in 2025–26 has seen continued tension around tariff regimes and supply chain restructuring. India has positioned itself as a beneficiary of the "China plus one" manufacturing diversification — sectors including electronics, pharmaceuticals, textiles, and auto components have seen increased FDI and export orders. For Kerala-based businesses, the logistics and IT/ITES services sector has benefited from this broader trend.
Indian exporters need to monitor the impact of US and EU tariff changes on their sector. Transfer pricing documentation (for businesses with related party cross-border transactions) has become more scrutinised in this environment, as tax authorities globally have stepped up review of profit shifting arrangements.
The India-UK Free Trade Agreement: Status Update
The India-UK FTA, under negotiation for several years, reached substantial conclusion in 2025. For Indian businesses exporting to the UK and for UK-based NRIs with India-source income, the FTA has implications for customs duties, professional services access, and potentially for the tax treaty provisions that govern how income is taxed between the two countries. Businesses with UK operations or supply chains should review their structure in light of the FTA's final terms.
Practical Implications for Financial Planning
For Indian businesses: rising export opportunities require working capital planning, currency risk management, and transfer pricing compliance. For NRIs: the current macro environment supports continued India-based investment through NRE FDs and equity mutual funds. For individuals: the RBI's accommodative rate stance makes home loan borrowing relatively affordable, supporting property purchase decisions for end-use and investment.
Regi Tom Antony And Associates provides financial planning, tax advisory, and business compliance services for businesses and NRIs navigating the current economic environment. For SME advisory services, visit smeadvisory.in. For NRI advisory, visit nriblueprint.com. Contact: letstalk@rtaandassociates.com | Kakkanad, Kochi.