Why India’s Stock Markets Are Crashing in 2025

India’s stock markets, once riding high on a multi-year bull run, have hit a rough patch in early 2025. The Sensex and Nifty have seen sharp declines, leaving investors rattled and analysts scrambling to pinpoint the causes. While no single event triggered the crash, a confluence of domestic and global factors has created a perfect storm for Indian equities. Here’s a closer look at what’s driving the downturn.

Foreign Investors Hit the Exit Button

One of the biggest culprits is the relentless selling by foreign institutional investors (FIIs). After pouring money into India for years, FIIs have reversed course, dumping stocks at an alarming rate. The weakening Indian rupee—sliding against the U.S. dollar—has made holding Indian assets less appealing. Coupled with global uncertainties, this has led to billions flowing out of the market. Domestic investors have tried to cushion the blow with their buying, but it’s been no match for the FII exodus.

Earnings Growth Falls Flat

Corporate India isn’t helping the case either. The latest earnings season has been a letdown, with companies posting sluggish, single-digit growth. After years of stocks trading at sky-high valuations, investors expected blockbuster results to justify the premiums. When that didn’t materialize, confidence took a hit, and a market correction followed. Expensive stocks with little growth to show for it are a recipe for a sell-off, and that’s exactly what’s unfolded.

Global Trade Tensions Ripple In

The world isn’t making things easier. New U.S. tariffs on Canada, Mexico, and China under President Trump have reignited fears of a global trade war. While India hasn’t been directly slapped with tariffs yet, the uncertainty has spooked markets everywhere. A weaker rupee, partly tied to these global pressures, has added fuel to the fire, raising costs for import-dependent firms and eroding investor appetite for riskier markets like India.

Tax Hikes Leave a Bitter Taste

Back home, policy moves have played a role too. The June 2024 Budget raised long-term and short-term capital gains taxes, a decision that didn’t sit well with investors. Months later, the sting is still being felt, especially among FIIs who may see lower returns on their Indian bets. This tax overhang has likely contributed to the steady outflow of foreign capital, amplifying the market’s woes.

A Long Overdue Reality Check

Finally, there’s the simple fact that Indian stocks had climbed too high, too fast. After years of stellar gains, valuations—particularly in midcap and smallcap segments—had soared beyond fundamentals. Add in signs of an economic slowdown, like softer GDP growth, and the market was ripe for a pullback. What we’re seeing now might just be an overdue reset to more realistic levels.

The Bigger Picture

The crash isn’t a single-thread story—it’s a tapestry of global headwinds, domestic missteps, and market dynamics catching up with reality. For investors, it’s a tense moment of recalibration. While some see it as a buying opportunity, others warn the pain could linger if FII selling persists or global tensions escalate. For now, India’s stock markets are in the grip of forces both within and beyond its borders, and the ride ahead looks anything but smooth.

Unveiling the Truth: Dr. Swamy demands Modi to come clean on USAID funding through disclosure in Parliament or Press

The recent controversy surrounding alleged U.S. funding in India’s electoral processes, sparked by former U.S. President Donald Trump’s claims and amplified by Dr. Subramanian Swamy’s pointed post on X on February 22, 2025, has thrust Modi into the global spotlight. Dr. Swamy, a seasoned Indian politician, economist, and vocal critic of Prime Minister Narendra Modi, has demanded greater transparency regarding the alleged $21 million provided by the U.S. Agency for International Development (USAID) to influence India’s general elections. In his post, Dr. Swamy insisted that if U.S. President Trump’s assertions—that the funds were handed to Modi for electoral purposes—are accurate, Modi must either disclose their use honestly or face scrutiny through a Public Interest Litigation (PIL) in court, potentially leading to his resignation as Prime Minister. This demand, rooted in Dr. Swamy’s history of legal activism is not merely a political maneuver but a call for accountability that warrants a robust, public response from the Indian government. A press conference or parliamentary statement is essential to address this legitimate concern, restore public trust, and uphold India’s democratic principles.

Dr. Swamy’s Demand for Transparency

Dr. Subramanian Swamy’s post on X, responding to a report from The Times of India about the MEA’s investigation into Trump’s claims, represents a pivotal moment in India’s ongoing political discourse. Dr. Swamy, known for his Hindu nationalist views, legal acumen, and history of challenging governmental opacity, argued that if Trump’s statement—that USAID provided $21 million to Modi for use in the 2024 general elections—is true, the Prime Minister must provide a full and honest disclosure of how these funds were utilized.

Dr. Swamy’s call for transparency is grounded in his long-standing role as a public advocate for accountability. As a former professor of Mathematical Economics at IIT Delhi, a member of the Planning Commission, and a Cabinet Minister under the Chandra Shekhar government, Dr. Swamy has a track record of using legal tools like PILs to challenge corruption and governance failures. His demand for Modi to disclose the funds or face a PIL is consistent with this history, particularly his high-profile cases, such as the 2G spectrum scam litigation against former Telecom Minister A. Raja and efforts to scrutinize the security of Electronic Voting Machines (EVMs). Dr. Swamy, as a legal eagle and anti-corruption crusader, has leveraged PILs to ensure governmental transparency, which adds weight to his current demand in national interest.

Dr. Swamy’s post resonates with a broader public sentiment, which reveal widespread confusion and concern over the alleged USAID funds, with some accusing NGOs, opposition parties, or the Modi government of benefiting from or mishandling foreign money. His insistence on disclosure or legal scrutiny reflects a legitimate public interest, given the potential implications for electoral fairness in India.

The Context of Trump’s Claims and India’s Investigation

The backdrop to Dr. Swamy’s demand is Trump’s repeated assertions that USAID allocated $21 million to influence India’s elections, alongside $29 million for Bangladesh, as part of efforts to boost voter turnout or strengthen political landscapes. These claims, initially met with confusion—given USAID’s clarification that the funds were intended for Bangladesh—have nonetheless triggered a national investigation by India’s Ministry of External Affairs (MEA). On February 21, 2025, MEA spokesperson Randhir Jaiswal described the matter as “deeply troubling,” signaling the government’s concern over potential foreign interference in India’s internal affairs.

This context validates Dr. Swamy’s demand for greater disclosure. The potential misuse of foreign funds in India’s elections raises serious questions about governmental accountability.

Public Interest Litigation (PIL)

Dr. Swamy’s threat to file a PIL if Modi does not disclose the USAID funds is a strategic and legally grounded response, reflecting his understanding of India’s judicial mechanisms. PILs, introduced in the 1980s by Justices P.N. Bhagwati and V.R. Krishna Iyer, allow citizens or public-spirited individuals to seek justice on behalf of the public, bypassing traditional locus standi requirements.

Dr. Swamy’s demand for Modi to face legal scrutiny through a PIL is not merely punitive but a call for an independent judicial review to uncover the truth, ensure accountability, and prevent future instances of foreign meddling. This is particularly pertinent given India’s history of vigilance against external influence, as noted in The Hindu’s analysis of global electoral interference fears, where India has expressed concerns over Western criticism and alleged foreign agendas during election cycles.

Dr. Swamy’s PIL threat aligns with his past legal battles, such as his successful challenge to the provision shielding senior officials from corruption probes without government permission (Dr. Subramanian Swamy vs. Director, CBI, 2014). This precedent demonstrates his ability to use PILs effectively to enforce transparency, reinforcing the legitimacy of his current demand.

A Press Conference or Parliamentary Statement ?

Addressing Dr. Swamy’s genuine demand through a press conference or parliamentary statement is not just advisable but imperative.

In the context of India’s global image, a transparent response is critical. With international attention on Trump’s comments and India’s investigation, a public statement would demonstrate India’s commitment to democratic accountability. This is particularly important given criticisms of democratic backsliding under Modi’s tenure, which highlight concerns over press freedom and civil rights.

Should Modi Resign?

PM Narendra Modi should consider resigning on ethical and moral grounds due to his apparent failure to maintain a robust and trustworthy U.S.-India relationship, which has deteriorated significantly under his leadership. This decline is starkly evident in the actions taken by former U.S. President Donald Trump, who has repeatedly targeted India, undermining the strategic partnership. For instance, Trump’s administration has implemented harsh deportation policies, chaining and forcibly removing Indian nationals—such as the 104 deportees in February 2025—causing humiliation and distress. Additionally, Trump’s threats of reciprocal tariffs, signal economic strain and tension, accusing India of being a "tariff king" and threatening trade reprisals. Most recently, Trump’s allegations linking USAID funds to Modi’s electoral influence, have further damaged India’s international standing and raised questions about Modi’s accountability, suggesting a moral lapse in safeguarding India’s honor and global status. These cumulative actions underscore Modi’s inability to foster a stable relationship with the U.S., compelling a serious ethical reconsideration of his leadership. Modi has also failed to nurture amicable and favorable relationships with India's neighbors. He has failed to remove push back China on illegal occupation of 4,035 sq km in Ladakh.

Conclusion

Dr. Subramanian Swamy’s demand for greater disclosure on the alleged USAID funds, or face scrutiny through a PIL, is a justified call for transparency in the face of a troubling controversy. Rooted in his history of legal activism and political advocacy, Dr. Swamy’s post on X on February 22, 2025, amplifies legitimate public concerns about foreign interference in India’s elections, sparked by Donald Trump’s provocative claims. A press conference or parliamentary statement is essential to address Dr. Swamy’s demand, clarify the facts, and uphold India’s democratic integrity.

Dr. Subramanian Swamy’s Scathing Critique of Narendra Modi: Unraveling Modi's policy failures

On February 19, 2025, Dr. Subramanian Swamy, a veteran Indian politician, economist, and Bharatiya Janata Party (BJP) leader, took to X to voice a blistering critique of Prime Minister Narendra Modi. In a post that has sparked widespread discussion, Dr. Swamy declared, 

This statement, reflects Dr. Swamy’s longstanding reputation as an outspoken critic, even within his own political circles, and raises questions about Modi’s leadership, India’s geopolitical stance, and economic trajectory.

Dr. Swamy’s Background: A Voice of Dissent

Subramanian Swamy, a Harvard-educated economist and former Cabinet Minister, is known for his Hindu nationalist leanings, legal activism, anti-corruption crusade and progressive economic ideas. This post is continuation of a pattern that is consistent with Dr. Swamy's ultra-nationalist views. It also reflects failure of opposition to hold ruling party accountable on various burning issues.

The China Border Dispute: Fact or Fiction?

Central to Dr. Swamy’s critique is the claim that Modi “gave away thousands of India’s undisputed land to China”. Since the deadly 2020 Galwan Valley clash, which claimed the lives of 20 Indian and four Chinese soldiers, the two nuclear-armed neighbors have been locked in a military standoff. While no definitive territorial losses have been officially acknowledged by the Indian government, Dr. Swamy has stated that Modi government has ceded 4,067 sq km of grazing lands and strategic areas in Ladakh to China.

Satellite imagery, local testimonies, and official documents collectively suggest significant territorial losses in Ladakh to China since 2020. High-resolution satellite images reveal permanent Chinese structures, such as military outposts and roads, extending beyond previous LAC alignments, notably in Pangong Tso and Depsang Plains, indicating a fortified presence. Local herders, like Lopzang Dadul from Chushul, corroborate this, reporting traditional grazing lands now inaccessible due to Chinese troops and Indian military barriers, shrinking their livelihoods. A January 2023 Ladakh Police research paper further bolsters the case, documenting India’s loss of presence at 26 out of 65 Patrolling Points, attributing it to restricted patrolling and buffer zones that favor Chinese control. Together, these sources paint a picture of incremental but tangible territorial erosion along the LAC.

Economic Woes: Has Modi “Wrecked” India’s Economy?

Dr. Subramanian Swamy has claimed that India’s economic growth rate is languishing at 4-5% per annum, a stark contrast to the government’s more optimistic projections. This assertion, often discussed in platforms like the VHS Gyan Ganga Sunday show, aligns with his critique of official GDP figures, which he argues are inflated due to methodological flaws and over-reliance on corporate supply-side data rather than demand-side realities. Dr. Swamy contends that post-2020 recovery figures (e.g., 7.9% average growth since 2021) mask structural weaknesses, such as stagnant rural consumption and unemployment, which he highlights in VHS discussions with experts like Dr. M.R. Venkatesh. These sessions often cite the contraction in household consumption growth and the failure to create the 90 million non-farm jobs needed by 2030 for sustainable 8-8.5% GDP growth, per McKinsey estimates, lending credence to Dr. Swamy’s argument that the real growth rate hovers closer to 4-5%, burdened by policy missteps and an uneven post-pandemic rebound.

“Crawling Before Trump”: Foreign Policy Under Scrutiny

Dr. Swamy’s characterization suggests subservience, contrasting with Modi’s public image as an assertive leader on the global stage. The timing of Dr. Swamy’s post, just days after the Trump-Modi meeting, underscores his skepticism about Modi’s foreign policy, particularly as India navigates its role in forums like BRICS and Quad while managing U.S.-China rivalry.

Facing pressure from U.S. indictments against Adani for a $250 million bribery scheme, Modi reportedly acquiesced to President Donald Trump’s trade demands, agreeing to lower tariffs on U.S. goods and committing to billions in purchases of American oil, gas, and F-35 jets—moves seen as concessions to deflect attention from Adani’s legal troubles.

Conclusion: A Call for Accountability or Political Theater?

Subramanian Swamy’s February 19, 2025, X post is a reflection of broader tensions within India’s political landscape. His claims about territorial losses to China, economic mismanagement, and subservience to the U.S. tap into ongoing debates about Modi’s leadership.

Dr. Swamy’s stature lends weight to his critique. For India, the issues Dr. Swamy raises—border security, economic stability, and foreign policy—are critical to its future.