Indian Economy: Getting tighter

Financial market turbulence persists globally amid evolving tariff situations. March's theme explores the impact of these developments in India's financial conditions.

Most of 2024 saw global factors contributing positively to India's financial conditions, with major central banks easing monetary policy and net capital inflows remaining positive. However, the situation reversed later in the year as the United States (US) Federal Reserve paused its rate cuts and fears of impending tariff wars began to take effect, which aggravated in 2025.

From October 2024 to February 2025, foreign portfolio investors withdrew $22.7 billion from Indian markets, compared with $21.6 billion of net inflows in the preceding six months.

Despite the Reserve Bank of India (RBI) easing its policy with a cut in the cash reserve ratio in December and repo rate in February, capital outflows led to tight liquidity and overall tighter financial conditions.