đź“°Update: IMF Turns Bearish on India

Three stories on Indian markets that you can't miss.

February 27, 2025

In partnership with

Good evening, 

Welcome to the best way to stay up-to-date on India’s financial markets. Here’s what’s in today’s newsletter:

  • Private Equity could improve rural healthcare in India,

  • The IMF turns bearish on Indian economic growth,

  • and India is feeling more pressure to cut tariffs.

Then, we close with Gupshup, a round-up of the most important headlines.

Have a question you want us to answer? Fill out this form and you could be featured in our newsletter.

—Shreyas, [email protected]

Market Update.

Private Equity Could Help Rural Healthcare.

The Indian healthcare sector is witnessing an unprecedented boom in PE investments, with major global firms like Blackstone, Temasek, and KKR funneling over $15 billion (â‚ą1.3 trillion) into 81 deals over the past three years. This surge in interest is driven by India’s rising age, increasing healthcare expenditures, and expanding insurance coverage — all outpacing the growth of hospital infrastructure and medical professionals.  

Why invest now? Some doctors are looking for capital to scale their hospitals, while many are preparing to sell as they approach retirement, with the next generation showing little inclination to take over. These trends have fueled aggressive deal-making, with private equity firms deploying capital through large-scale acquisitions of multispecialty hospital chains to then buyout smaller facilities. 

KKR’s recent investment in a hospital and cancer care chain marks its second major purchase in India, following a successful exit from Max Healthcare in 2022 where it made a 5x return on cash invested. Such lucrative exits have strengthened India’s reputation as a market that not only creates value but also provides smooth liquidity for investors to cash out — a crucial factor in attracting repeat PE investments.  

Beyond multispecialty hospitals, the next frontier of healthcare investments is in single-specialty chains. Firms like TPG and GIC are investing in mother-care and fertility clinics, while Quadria Capital is backing a dialysis services network. These ventures offer smaller but targeted investments, often funding greenfield expansions. The shift toward asset-light models like eye-care clinics reflects a broader trend of unbundling the hospital space, enabling quicker scalability and operational efficiencies.  

Domestic capital is here too. Adding another dimension to this transformation are India’s largest business groups such as Adani, Bajaj, and Tata which are building hospitals either as profit-driven ventures or philanthropic initiatives. Meanwhile, investors are increasingly shifting their focus beyond metro cities, targeting healthcare facilities in smaller towns where demand is growing. General Atlantic’s 2023 investment in Ujala Cygnus, a hospital network spanning 21 locations in northern India, exemplifies this strategy. While such investments promise to democratize healthcare access, they also come with challenges, including volatile return expectations and more complex deal valuations.  

Another key factor reshaping the sector is technology, particularly AI. While intelligent solutions, such as remote ICUs and AI-powered diagnostics, require significant capital investments, they also offer scalable solutions for expanding access to specialized medical procedures in underserved areas.  

Despite concerns over the potential downsides of large-scale private equity involvement (other countries have seen investor-driven models lead to cost-cutting at the expense of the patient) India remains relatively insulated for now. Corporate hospital chains still account for less than 10 percent of total hospital capacity so private investments are seen as a needed capital injection into a healthcare system that struggles with underfunding.

The IMF Turns Bearish on India.

According to the IMF, India’s strong economic growth faces potential challenges from geopolitical fragmentation and slowing domestic demand. In its Article IV country report released today, the IMF highlighted that escalating regional conflicts, volatile commodity prices, weakened international cooperation, and rising cyber threats pose significant risks to India’s economic trajectory.  

The Washington-based lender projects India’s gross domestic product to expand by 6.5 percent for both the current and next financial year but cautioned that the risks to this outlook are “tilted to the downside.” On the domestic front, the IMF warned that private consumption and investment recovery could be weaker than expected if real incomes fail to rebound. Additionally, weather-related shocks could disrupt agricultural output, driving up food prices and slowing rural consumption recovery.  

Some fixes for the economy: To maximize its growth potential, the IMF recommended that India accelerate structural reforms, secure and diversify its supply of critical commodities, and refrain from introducing further trade restrictions. Meanwhile, the Indian government has projected GDP growth at 6.4 percent for the current year and between 6.3 percent and 6.8 percent for the next fiscal year.  

While structural reforms sound vague, many of them relate to red-taping currently present throughout the economy. Caps on foreign direct investment and entry plans for companies have led to manufacturing stagnating by far more than expected. A weak tax collection system (and a weak recent update to the tax code) makes it hard for the government to pass excess wealth from the top to the bottom of the pyramid; this is particularly an issue since India has struggled with job and wage creation recently. 

A few positives: The IMF commended the RBI’s “well-calibrated monetary policy” and suggested that opportunities could arise for further gradual reductions in policy rates. Earlier this month, the central bank cut interest rates for the first time since 2020, signaling a shift in policy. The IMF advised that monetary policy should remain “data-dependent and well-communicated.”  

Additionally, the report emphasized the need for greater exchange rate flexibility to help absorb external shocks, recommending that intervention be limited to managing disorderly market conditions. This, the IMF argued, would reduce reliance on costly precautionary foreign reserves and support the development of India’s financial markets.

India Feels Pressure to Cut Tariffs Again.

Indian officials are considering lowering tariffs on a range of imports, including cars, chemicals, agricultural products, pharmaceuticals, medical devices, and electronics, in an effort to avoid potential reciprocal levies threatened by Trump. Hasty plans are underway after Trump announced that 25 percent tariffs are going to be imposed on Canada and Mexico even after they made efforts to secure their borders. Discussions in New Delhi are ongoing, with officials exploring options such as sector-specific tariff reductions or an overall reduction in average tariffs. While these plans are not yet finalized, the move signals India's intent to preserve trade ties with its single largest trading partner.  

Some initial takeaways: Recent tariff cuts, such as those on high-end motorcycles and bourbon whiskey, were seen as symbolic gestures aimed at addressing politically significant U.S. exports to India. However, the latest discussions indicate a broader and more substantial effort to recalibrate India’s trade policy. The Indian Ministry of Commerce and Industry has set up a team to gather feedback from various ministries and stakeholders on the potential economic impact of U.S. tariffs. While several sectors could see tariff reductions, dairy products are expected to remain exempt.  

India is aiming to finalize a trade deal with the U.S. by the fall, aligning with the goal set during the summit in Washington earlier this month. While officials acknowledge that a deal is unlikely before Trump’s reciprocal tariffs take effect in April, they hope that visible progress in negotiations could help shield India from the proposed duties. The U.S. has expressed a desire to sell more energy and weapons to India — markets dominated by Russian suppliers — alongside industrial goods, automobiles, and agricultural products. In response, India is compiling a list of goods it sources from other countries but could potentially buy from the U.S. instead.  

India’s issue: Trump's directive on February 13 to propose reciprocal tariffs represents a significant shift in America's trade policy, aiming to impose duties that match those levied by other countries on U.S. exports. Experts warn that this could disproportionately impact India, which maintains some of the highest tariff rates globally. As a safeguard against an influx of cheap Chinese imports that could result from broad tariff reductions, Indian officials are also considering alternative protective measures such as stricter quality standards and anti-dumping duties. The issue with those standards and anti-dumping duties is that they essentially are akin to tariffs, putting India between a rock and a hard place.

As a reminder, the Trump-Modi summit underscored both nations’ commitment to strengthening economic ties, with an ambitious target of expanding bilateral trade from $127 billion (₹11.1 trillion) in 2023 to $500 billion (₹43.6 trillion) by 2030. The U.S. has long sought to deepen its relationship with India as a strategic counterbalance to China's growing influence in the region, making trade negotiations a critical component of broader geopolitical dynamics.

Message from our Sponsor

Solving a Silent Threat to Your Health

Chemical pesticides are being used in our food, homes and offices. But Med-X has developed a 100% chemical-free pesticide proven to outperform traditional solutions in mosquito control. For a limited time, you can become a shareholder as they expand to 41 new global markets.

Gupshup.

Macro

Equities

Alts

Policy

See you Friday.

Written by Yash Tibrewal. Edited by Shreyas Sinha.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.