SBI Analysis prompt that the sharp financial rebound following COVID-19 was largely pushed by an unprecedented coverage response fairly than sustainable progress. The long-term development, nonetheless, factors to a deceleration in GDP growth. The US financial system grew by 3.2 per cent in This autumn 2023, however this slowed to 2.5 per cent in This autumn 2024. The Atlanta Federal Reserve’s GDPNow mannequin estimated a contraction of two.4 per cent for Q1 2025, marking a major reversal from earlier progress projections.
Non-public consumption, a key driver of the US financial system, has been declining since 2000. The report highlights that whereas inflation (CPI) has eased, the delayed affect on demand is anticipated to weigh on financial exercise. In January 2025, the Private Consumption Expenditures (PCE) index—broadly considered a key measure of shopper spending—declined for the primary time in almost two years.
US financial system could also be heading for a downturn, with slowing GDP progress, weak personal consumption, and stagnant exports, in keeping with SBI Analysis.
The Q1 2025 GDP is projected to contract by 2.4 per cent.
Rising debt, excessive labour prices, and commerce tensions, together with new tariffs, add to uncertainty.
In distinction, India stays resilient, attracting report FII inflows and pursuing strategic FTAs.
Moreover, actual personal funding has been stagnant since 2020, with excessive wages appearing as a deterrent for brand new enterprise expansions. The common employer price for personal trade staff reached $31.47 per hour in December 2024, which, in keeping with the report, might discourage large-scale investments in conventional manufacturing sectors.
The report highlighted a secular rise within the US debt-to-GDP ratio, elevating issues about long-term fiscal sustainability. On the identical time, the US greenback has exhibited cyclical traits, exhibiting resilience regardless of the rising debt burden. Nevertheless, SBI Analysis warned that drastic federal spending cuts might have disastrous penalties, probably undoing financial progress remodeled earlier many years.
The imposition of a 25 per cent tariff on metal and aluminium imports by the Trump administration on March 13, 2025, has added to financial uncertainties. The report famous that India, which has a commerce deficit with the US for aluminium ($13 million) and metal ($406 million), may benefit by exploring various markets. Nevertheless, the report additionally estimates that Indian exports to the US might decline by 3–3.5 per cent because of potential reciprocal tariffs.
The report additionally raised the potential of an financial recession, given the downward trajectory of key financial indicators. As financial progress slows and commerce uncertainties rise, the US financial system faces a interval of heightened danger. Nevertheless, SBI Analysis prompt that structural reforms, coupled with personal sector growth and technological developments, might assist stabilise progress in the long term—although such changes might include short-term prices.
Regardless of world financial headwinds, the report highlighted India’s resilience, notably in international institutional funding (FII) inflows. India attracted $41 billion in FII investments in FY24, the very best since FY16, with strong inflows into sectors like telecommunications, healthcare, and capital items.
Furthermore, India’s proactive free commerce settlement (FTA) technique—negotiating offers with the UK, EU, and Canada—might additional bolster its financial place. The report estimated that India’s FTA with the UK alone might improve bilateral commerce by $15 billion by 2030.
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