Construction employees in Mumbai, India, on June 5, 2024.
Bloomberg | Bloomberg | Getty Images
India’s economic system expanded by simply 5.4% in its second fiscal quarter ending September, properly beneath estimates by economists and near a two-year low.
The print follows 6.7% development over the earlier quarter and is the bottom studying because the final quarter of 2022. Economists polled by Reuters had forecast development of 6.5% for the interval, whereas the Reserve Bank of India anticipated an growth of seven%.
The country’s statistics agency famous sluggish development in manufacturing and the mining sector.
The yield on the nation’s 10-year sovereign bond shortly sank to six.74% after the discharge, from round 6.8%.
The weak GDP studying may probably have an effect on the nation’s rate of interest trajectory, with the RBI’s Monetary Policy Committee scheduled to fulfill between Dec. 6-8. Markets watchers had been anticipating an eleventh consecutive pause by the RBI, with the repo charge presently at 6.5%.
Harry Chambers, an assistant economist at Capital Economics, mentioned the Friday studying confirmed that weak spot was “broad primarily based.” His agency expects financial exercise “to battle over the approaching quarters.”
“That bolsters the case for coverage loosening, however the latest bounce in inflation means the RBI will not really feel snug chopping rates of interest for just a few extra months but,” he mentioned in analysis be aware.
Speaking to CNBC “Squawk Box Asia” earlier than the GDP launch, Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis, forecast that India’s economic system will gradual however not “collapse” in 2025.
She mentioned that Natixis has a 2025 development forecast of 6.4% for India — with out clarifying whether or not this refers back to the fiscal or calendar yr — however added that the print may additionally are available in as little as 6%, which she certified as “not a bit downside, but it surely’s not welcome.”
Separately, the RBI projected that GDP development for the 2024 fiscal yr ending in March 2025 will attain the next 7.2%.
Asked how India’s economic system will fare below President-elect Donald Trump’s second presidency, Herrero mentioned the nation is “not likely on the middle of the reshuffling of the worth chain that China has been conducting.”
“If I had been the Trump administration, I’d begin [looking at tariffs for] Vietnam. That’s a way more apparent case,” she famous.
She mentioned that China may make merchandise in India for Indian consumption as an alternative of exporting merchandise globally — and as such, New Delhi may keep away from getting hit by tariffs.
