Issue #22
Private sector at 10-months low, US Biz activities slowed, Liquidity Injection and India to become 4th largest economy.
India’s Private Sector Growth Hits 10-Month Low in December
India’s private sector activity slowed to its weakest pace in 10 months in December 2025, as indicated by the HSBC flash PMI survey released on December 16, with both manufacturing and services sectors showing subdued expansion amid softer demand and stalled hiring. This marked a cooling from the robust 8.2% GDP growth in the July-September quarter, raising concerns about the sustainability of the year’s strong performance as global trade tensions lingered.
Timeless Principle: Economic expansions are cyclical; accordingly the active traders choose the sectors to invest in.
US Business Activity Growth Slows to Six-Month Low
US business activity decelerated sharply in December 2025, reaching its weakest level since June, according to S&P Global’s flash PMI data released on December 16th, with new orders declining across manufacturing and services due to heightened uncertainty from potential tariff hikes and geopolitical strains. This softening contributed to a broader global slowdown signal, with implications for export-dependent economies like ours.
Timeless Principle: The PMI is a diffusion-based leading indicator whose informational content resides not in its absolute level but in the sign, magnitude, and persistence of deviations from the certain threshold. These are second-order changes in aggregate production momentum and not a realized output.
RBI Minutes Hint at Further Rate Easing as Growth Moderates
The Reserve Bank of India’s December 19, 2025, policy minutes revealed scope for additional interest rate cuts in 2026, as members noted a projected slowdown in GDP growth to 7% amid persistent global risks, while revising the current fiscal year’s forecast upward to 7.3%. Inflation remained below target, providing policymakers room to support consumption and investment.
Timeless Principle: Effectiveness of “target” inflation depends on the credibility-weighted alignment between forward inflation expectations and the central bank’s reaction.
RBI’s Liquidity Injection Sparks ‘Santa Claus’ Rally in Bonds
On December 24, 2025, the RBI announced a massive liquidity infusion of up to 2.9 trillion rupees (Est. ~32 Bn USD) via bond purchases and forex swaps, igniting a year-end rally in Indian government bonds and easing funding pressures for banks ahead of the holiday season. This move underscored the central bank’s proactive stance in maintaining financial stability amid year-end volatility.
Timeless Principle: Real-economy impact of liquidity injection is governed by the elasticity of credit demand and the transmission efficiency across financial intermediation channels.
India Surpasses Japan to Become World’s Fourth-Largest Economy
Wrapping up 2025 on a high note, official data confirmed on December 24 that India had overtaken Japan to claim the spot as the world’s fourth-largest economy, driven by an 8.2% GDP expansion in Q2 FY26 and resilient domestic demand, positioning the nation for a projected 7.3% growth in the coming fiscal year. Exports also strengthened, with total merchandise and services trade hitting new highs.
Timeless Principle: Long-term structural reforms, especially digitalization and infrastructure investment, propel economies past competitors through compounding advantages.