Shoppers at the DLF Promenade mall in New Delhi, India, on Oct. 21, 2023. As the number of middle to high-income households climb, India’s consumer market is positioned to become the world’s third largest by 2027, according to estimates by BMI.
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India’s economy expanded by just 5.4% in its second fiscal quarter ending September, well below estimates by economists and close to a two-year low.
The print follows 6.7% growth over the previous quarter and came in below expectations for a 6.5% clip, according to economists polled by Reuters.
The Reserve Bank of India had forecast expansion of 7% over the period and the reading is the lowest since the last quarter of 2022.
In October, the RBI said after its last monetary policy meeting that the key agriculture sector remained “resilient” and was expected to perform well due to higher-than-expected rainfall and robust reservoir levels.
On the demand side, healthy sowing of kharif — or autumn crops — coupled with sustained momentum in consumer spending in the festival season boded well for private consumption.
The RBI also noted in October that consumer and business confidence had improved and that “external demand is expected to get support from improving global trade volumes.”
Speaking to CNBC “Squawk Box Asia” before the GDP release, Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis, forecast that India’s economy will slow but not “collapse” in 2025.
She said that Natixis has a 2025 growth forecast of 6.4% for India — without clarifying whether this refers to the fiscal or calendar year — but added that the print could also come in as low as 6%, which she qualified as “not a bit problem, but it’s not welcome.”
Separately, the RBI projected that GDP growth for the 2024 fiscal year ending in March 2025 will reach a higher 7.2%.
Asked how India’s economy will fare under President-elect Donald Trump’s second presidency, Herrero said the country is “not really at the center of the reshuffling of the value chain that China has been conducting.”
“If I were the Trump administration, I would start [looking at tariffs for] Vietnam. That’s a much more obvious case,” she noted.
She said that China could make products in India for Indian consumption instead of exporting products globally — and as such, New Delhi could avoid getting hit by tariffs.