India’s currency became the worst-performing Asian currency. It reached a new low against the US dollar recently, raising concerns about the economic situation, the impact on foreign investment, and rising dependence on imports. Foreign institutional investors (FIIs) are withdrawing at record levels, and the effects of high tariffs are casting a shadow over high economic growth forecasts. The Government has focused on implementing key initiatives, resulting in 100% FDI in the insurance sector becoming a reality, and new laws have been proposed. The silver lining was the increase in intellectual property filings.
Asian Development Bank – The Asian Development Bank recently released its Asian Development Outlook December 2025: Growth Steadies But Uncertainty Lingers. According to the report, India’s growth forecast for FY2025 (fiscal year ending March 2026) has been revised to 7.2% from 6.5% in the September ADO, as reported by Asia Law Portal. GDP grew by a faster-than-expected 8.2% in the second quarter of FY2025 (July to September 2025), leading to an average growth of 8% in the first half of the fiscal year. The strong growth is attributable to robust expansion in the manufacturing and services sectors on the supply side, as well as to demand-side consumption and investment. Exports remained resilient, driven by front-loading ahead of elevated US tariffs and diversification into non-U.S. markets. Growth is expected to moderate in the second half, as the central Government’s capital spending eases amid fiscal consolidation efforts and export growth softens amid elevated US tariffs affecting select Indian exports. However, stronger-than-expected consumption demand, driven by a robust rural economy, the impact of GST rate cuts, and steady credit growth, will support growth. On the supply side, domestic industrial demand will be tempered by muted export demand and robust import demand. The services sector, which grew by 9.3% in the first half of FY2025, will continue to grow strongly, supported by robust domestic and external demand. Growth in FY2026 is maintained at 6.5%. A strong growth outcome in the first half of FY2025 will result in an unfavourable base effect for the corresponding period in FY2026. However, this is likely to be offset by a range of recent measures that incentivise growth, such as enhanced labour market flexibility through labour law reforms, simplification of GST, relaxation of import restrictions for selected products, and credit relief and support for exporters affected by US tariffs. Risks remain balanced, with downside risks coming from potential escalation of trade tensions and weather-related shocks. In contrast, upside potential could emerge if trade negotiations with the US yield a lower tariff rate for India.
Fall of the Indian Rupee – The Indian Rupee, already the weakest Asian currency this year in a back-loaded retreat against the US dollar, breached the 91 mark for the first time on unabated outflows from local assets by overseas investors. The currency, which reached a fresh all-time low of 91.08, has depreciated by more than 6% against the US dollar in 2025. Nearly half of that depreciation occurred in less than a month, between November 19 and December 16, when the rupee declined by up to 2.66%. The rupee’s depreciation against the dollar this fiscal has been influenced by the increase in trade deficit and “ongoing developments in India’s trade agreement with the US, amid relatively weak support from the capital account, the Lok Sabha (lower house of Parliament) was informed. In a written reply, Union Minister of State for Finance Pankaj Chaudhary said various domestic and global factors influence the exchange rate. These include movements in the Dollar Index, trends in capital flows, interest rates, crude prices, and the current account deficit.
Draft rules for Labour Codes – Pursuant to the enforcement of the Labour Codes (reported by Asia Law Portal last month) and taking forward the implementation work of the same, the Government has issued the draft rules for the four laws that clarify a variety of provisions including the calculation of minimum rate of wages, setting up of a National Social Security Board for gig workers and provisions on retrenchment. The draft rules on the four Codes – Code on Wages, 2019, Code on Occupational Safety, Health and Working Conditions Code, 2019, the Industrial Relations Code, 2020 and the Code on Social Security, 2020, have been put up on the website of the Labour Ministry. Comments from stakeholders are expected within 30 to 45 days. The draft rules constitute the next step in implementing the Labour Codes, which came into effect on November 21, 2025. Once the Labour Ministry gets feedback from stakeholders, it will finalise and notify the rules, making all provisions of the Codes fully effective. While the labour ministry has not provided a timeline, it is expected that this will be completed within the next two to three months.
FDI in Insurance – The Union Finance Ministry has notified the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2025, aligning them with the 100% foreign investment limit approved by Parliament in December 2025. In August 2025, the finance ministry issued a draft notification seeking to replace the existing limit of 74% foreign investment “as stipulated by the Insurance Act, 1938,” which was reported by Asia Law Portal. According to the new notification, an Indian insurance company with foreign investment should have at least one of its chief executive officer, managing director, or chairperson who is a resident Indian citizen. The earlier condition was that most key management personnel of the insurance company, which had 49% foreign investment, should be resident Indian citizens. The notification also removes the requirement that an insurance firm with foreign investment have at least 50% of its directors be independent, or that an independent director serve as chairperson of the board, with at least one-third of the board comprising independent directors. The gazette notification applicable from December 30, 2025, also deletes the stipulation that an insurance company with 49% foreign investment must maintain a solvency margin of less than 1.2 times the control level of solvency, and that not less than 50% of the net profit for the financial year shall be retained in the general reserve. The Parliament passed the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, in December, which allows up to 100% foreign direct investment in insurance firms.
Rising IP Filings – India’s intellectual property filings touched a new high in FY25, with total IPR applications rising around 20% on-year to nearly 7.5 lakh, led by strong domestic innovation. Patent applications crossed 75,000, with Indian residents accounting for over 61.9% of filings, according to the latest annual report of the Office of the Controller General of Patents, Designs & Trade Marks. Trademark filings stood at over 5.3 lakh, growing at a double-digit rate, reflecting strong brand creation across sectors, while design registrations crossed 40,000.
Nuclear Power Development – The Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill, 2025, which was passed in Parliament on Thursday (December 18), permits private entities to enter the operational side of the tightly regulated nuclear power sector. Once notified, the law will replace two key legislations — the Atomic Energy Act, 1962 (AE Act) and the Civil Liability for Nuclear Damage Act, 2010 (CLNDA) —and effectively redraws India’s N-power regime, tweaking norms regarding who can build and operate plants, how accident liability is capped, the role of the safety regulator, and mechanisms for dispute resolution and compensation, among other things. The Bill was passed despite the Opposition voicing major concerns, particularly regarding the whittling down of provisions that hold equipment suppliers responsible in the event of a nuclear accident. The Centre says, however, that the law is a key step towards achieving India’s target of 100 gigawatt of nuclear power capacity by 2047.
