The World As We See It

Global Macro Scenario

The year 2024 saw global economies begin to find their footing amidst persistent geopolitical uncertainty and supply chain disruptions. Governments and central banks navigated a delicate balance, implementing policy changes and rate cuts to foster growth while simultaneously curbing inflation. Global elections held throughout the year, impacting roughly half the world's population, provided a clearer sense of political and policy direction.

Global Gross Domestic Product (GDP) growth is expected to be at 3.2% for CY2024 with India growing at 6.8%. CY2025 is expected to be similar to the projected Global GDP at 3.3% with India contributing 6.9%.

During this time, the rate of global expansion accelerated to a four-month high with a Global Composite Purchasing Managers’ Index (PMI) Output Index of 52.6 in December 2024 signalling expansion for the 14th consecutive month. This strong growth is driven by the service sector where financial services outpaced the rest, while business and consumer services also saw an increase. The manufacturing sector, however, contracted in December 2024 after minor expansions in the previous two months. Spain, India and the US displayed the strongest economic growth during this period while the largest Eurozone Economies of Germany, France and Italy saw their output contract.

Global Investment is expected to pick up as monetary policies ease out and the world experiences reduced inflationary pressures. Global inflation is forecast to settle at 4.3% in 2025, marking a significant step toward price stability after years of economic turbulence. The oil market continues to experience volatility this quarter, driven upward by escalating geopolitical tensions, while the backdrop of muted and ample supply has weighed down on prices. Brent crude prices closed the year at USD 74.64 per barrel on 31st December 2024, up from USD 74.02 in September 2024.

Turning West, the US economy outperformed expectations with an estimated GDP of 2.8% in 2024 due to strong consumer spending, public sector spending, and non-residential investments. The financial markets reflected this vigour, with the S&P 500 and Nasdaq closing CY2024 strong with returns of 23.31% and 25.71%, respectively. By the end of 2QFY25, the Federal Reserve announced it would reduce the federal funds rate to 4.25%-4.50%, cutting rates for the third time in a row.

Across the Atlantic, Europe is projected to grow at 0.9% in 2024, and this is expected to further increase in 2025 and 2026.5 The European Central Bank (ECB) once again reduced the deposit rate by 25 basis points to 3.0% w.e.f December 2024, from the previously reduced rate of 3.25% in October 2024. This move was made due to an expectation of delayed economic recovery and to bring inflation down to the targeted 2% range. Core inflation is projected at an average of 2.9% in 2024 and 2.3% in 2025.

Turning to the East, China’s CY2024 growth was strong and is expected to be at 4.9% for CY2024 based on public sector investments and strong export performance, partly offset by subdued consumption growth and lingering weakness in the property sector. China’s foreign exchange reserves dropped to USD 3.267 trillion at the end of November 2024, after reaching a high of USD 3.3164 trillion at the end of September 2024. Its core inflation dropped by 0.3% year-on-year in December 2024, after a 0.5% drop the previous month.

In Japan, GDP is poised to grow from an estimated -0.2% CY2024 to 1.0% CY2025 primarily due to continued growth in consumption.5 In CY2024, Japan’s inflation expectations have risen moderately. The core inflation has been in the range of 2.3-2.8% YoY growth during the second half of CY2024, as services prices have continued to rise moderately, reflecting factors such as wage increases, although the effects of a passthrough to consumer prices of cost increases led by the past rise in import prices have waned.

In summary, the global macroeconomic scenario during CY2024 was one of steady growth, with uncertainty stemming from inflation and geopolitical tensions coming under control. Central banks have stepped up to balance inflation control with growth support. We begin 2025 with great optimism despite continued geopolitical uncertainty from strong growth projections, stable governments and policy direction and control.

India Macro Scenario

India's economic landscape is painting a vibrant picture of resilience and growth this quarter, with the United Nations naming India as the fastest-growing large economy in the world and the RBI projecting real GDP growth to be at 6.6% for FY2025, way above its emerging markets counterparts.

India’s Composite PMI Output during CY2024 also ended the year on the high note of 59.2 in December 2024, up from 58.6 in November, signalling the strongest rise for four months. At 56.4 in December, India’s Manufacturing PMI was at a 12-month low and indicated a weaker improvement in operating conditions. This was offset by high growth from India’s service PMI which rose from 58.4 in November to 59.3 in December, highlighting the strongest rate of expansion in four months.

Looking ahead, foodgrain production coupled with an expected pickup in industrial activity and sustained buoyancy in services bode well for private consumption. Investment activity is also expected to pick up in CY2025. Resilient world trade prospects should provide support to export demand.

Although new export sales rose at a slower rate than total new business, the pace of growth for the former strengthened as firms were able to secure international orders from across the globe.

Headline CPI inflation eased to 5.22% in December 2024, after a sharp uptick in September and October 2024, finally stabilizing toward the end of the year. The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has once again maintained the repo rate at 6.5% to control inflation while supporting the country’s growth.

During the quarter, a rapidly falling Indian Rupee caused concern, closing at its lowest yet of INR 85.64 on 31st December 2024. This has presented a cause for concern and can be attributed largely to a strengthening dollar, growth below projection and foreign portfolio outflow. The country’s forex reserves closed 3% higher than the previous year at USD 640 million.

During 3QFY25, the stock market has kept investors on their toes. A volatile Nifty50 dropped 8.4% and the S&P BSE Sensex settled at 7.3% lower as compared to 2QFY25 with a highly volatile S&P BSE Smallcap index and S&P BSE Midcap index. Investors seem to have doubled down with December’s SIP collections for equity mutual funds increasing 15% to INR 411.56 million from November's INR 359.43 million. Overall, during CY2024, equity mutual funds saw total inflows of INR 3.94 trillion.

GST collections continue to serve as a significant barometer of economic activity, with monthly GST collections for November and December 2024 showing healthy YoY growth of 8.5% and 7.3% with gross collections of INR 1.82 trillion and INR 1.77 trillion respectively.  The collections for November and December 2024 reflect a seasonal trend post-festive spending.

During 2025 we see India’s economic indicators driving an upward trend and positioning India as a key player in the global economic arena. Currently, India is projected to be the fastest-growing of the G20 economies. The coming quarters promise to be both exciting and pivotal as the nation strives to balance growth with stability in its quest for economic prosperity.

Early Stage Ecosystem

The Indian early-stage startup ecosystem remains a hub of innovation and a powerful magnet for investor capital. Despite global economic uncertainties posing potential headwinds, 3QFY25 demonstrated the ecosystem's resilience and long-term potential with the launch of over 157,000 start-ups during the year with half originating from Tier II and III cities.

2024 closed having seen funds raised growing by 36.6% over 2023 to the tune of USD 11.16 billion with an average deal value of USD 6.90 million. India witnessed a total of 1,616 investment rounds, ~92% of these start-up investments done during the early stage (up to Series A), receiving 25% of the total capital raised during the year.

In 3QFY25, investment activity in the Indian startup ecosystem was flat over the previous quarter. This quarter saw a minor increase in deal count while the average deal value dropped during the period. The total investment amount saw a minor drop of 4% from USD 4.02 billion to USD 3.86 billion. The average deal value experienced a dip of ~13%, from USD 6.34 million in 2QFY25 to USD 5.54 million. These figures demonstrate a minor seasonal slowing in transactions during the third quarter as noticed during previous years. The clear upturn of the investment cycle during 2024 sets a positive tone for 2025 and suggests a promising outlook for early-stage investments in India during the next few years.

Consumer-led sectors remain an investor favourite, driven by large funding rounds in quick commerce, which captured the bulk of funding in the last quarter. During 3QFY25, retail emerged as the second-largest investment trend by value, propelled by the expansion of India’s consumer market. Additionally, the automobile segment boosted deal value, with startups focusing on the used-vehicle market drawing significant investor attention.

These trends reflect the evolving Indian startup landscape, with investors prioritizing early identification of emerging trends. In the early-stage ecosystem, a distinct preference has emerged for consumer, deep tech & AI, and enterprise tech investments. Notably, the consumer sector attracted the most capital, while deep-tech and AI led in the number of early-stage funding rounds.

Looking ahead, sectors like ConsumerTech, EnterpriseTech, AI, and RetailTech are expected to sustain significant investor interest, further diversifying and strengthening the Indian startup ecosystem.

At Equanimity, we remain highly optimistic about the potential of early-stage ventures within our portfolio. This diverse group of companies continues to address critical market needs with innovative, cutting-edge solutions. Their progress, along with the broader dynamism of India’s entrepreneurial landscape, reinforces our belief in the transformative power of startups.