People buy vegetables at a local market in Noida, Uttar Pradesh, on August 22, 2023.
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This report comes from this week’s CNBC “Inside India” newsletter, which brings you timely, insightful news and market commentary on the emerging powerhouse and the big players behind its meteoric rise. Like what you see? You can subscribe here.
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When India’s new fiscal year begins in April, expectations are that the next 12 months will deliver strong economic growth, decent stock market returns and help achieve its goal of becoming the world’s third-largest economy by 2027.
Few expected India’s latest gross domestic product (GDP) figures to feature a plot twist worthy of a Bollywood blockbuster.
According to data released on November 29, India’s quarterly growth rate through September was 5.4%. in a Reuters poll.
To be sure, analysts expect economic growth to slow slightly from the 6.7% expansion in the second quarter, in part due to the impact of rising inflation on household and business spending. Few expected the economic slowdown to be so severe.
Macquarie analysts said growth was affected by “slowing urban consumer demand”. India’s growing middle-income class is hailed as the country’s growth engine, and its spending on goods and services is crucial to supporting consumption levels and corporate profits.
India’s retail inflation rises to Growth in October was 6.2%, a 14-month high Vegetables are a staple food in most Indian households as their prices are rising exponentially. Vegetable prices increased by 42.2% in October compared with the same period last year and by 36% in September.
Businesses are also feeling the pinch from lower household spending in India, with many reporting weak profit momentum in the September quarter, Macquarie analysts noted.
Analysts added that other factors such as sluggish capital expenditure, investment activity, slowing exports and a sharp slowdown in credit growth have further weighed on the Indian economy.
Macquarie analysts said overall credit growth “driven GDP”, with credit growth in the September quarter at around 11%, down from 16% a year ago, they added.
It is worth noting that the latest GDP data did not cause undue panic.
The benchmark Nifty 50 index has edged higher since the GDP release and is up 13.7% since the start of the year. For comparison, the MSCI Asia ex Japan Index The company, which allocates nearly 23% of its funds to India, is down about 12% year-to-date.
The Reserve Bank of India announced its latest interest rate decision on Friday and is also expected to keep interest rates stable.
What will happen in the future?
Forecasting the outlook for the rest of the fiscal year is tricky.
For Alicia Garcia Herrero, the Indian economy will “definitely” enter a slowdown in growth in 2025.
“When we say growth is slowing, we don’t mean the economy is collapsing. We’re just saying it’s going to be 6% – our current forecast is 6.4% (but) it’s probably 6%,” said Natixis Asia Pacific chief executive The economist told CNBC’s Squawk Box Asia last week, hours before the GDP data was released.
Krishna Bhimavarapu, Asia Pacific economist at State Street Global Advisors, expects the Indian economy to face some “downside risks” in the coming months. While Bhimavarap doesn’t expect “that big of an impact” over the long-term horizon of around 20 years, he stressed the need for policy action to address economic gaps to avoid further downside risks.
Investors hoping that India’s economic growth story remains unchanged will be betting on avoiding a follow-up to September’s data.
need to know
Gautam Adani breaks his silence. At an event on Saturday, the Adani Group founder said the company stood by its “absolute commitment to world-class regulatory compliance”, without elaborating. On Friday, Adani Group CFO rejected All charges against Adani Green Energy on Wednesday refute claims in the indictment, push up stock price Part of the Adani Group.
One of India’s largest automakers has announced the launch of two electric vehicles priced at about $25,000. With this competitive pricing, the company is trying to gain market share in a country where EV adoption remains low and EV sales are dominated by domestic manufacturers. analysts are Even more bullish About what happened after the company made the announcement. (Available to subscribers only)
What happened to the market?
Indian stocks continued their gains this week. this nifty 50 The index rose 2.4% this week to 24,708.40 points. The index has gained 13.7% this year.
Due to slowing GDP growth, India’s 10-year government bond benchmark yield has fallen more than 10 basis points to 6.67% since the end of last week.
TCW Group’s Jae Lee told CNBC this week that India “should not be a direct target of Trump and possible future tariffs.” But if the yuan depreciates in the face of tariffs, it will be difficult for India Maintain a strong currencyLi added.
What happens next week?
December 6: Indian interest rate decision, US non-farm employment data in November, China’s November inflation rate, Suraksha Diagnostic IPO
December 9: Property Share Investment Trust REIT IPO, Japan’s third quarter GDP final value
December 11: U.S. Consumer Price Index for November
December 12: India’s November inflation rate, US November producer price index, European Central Bank interest rate decision, UK October GDP
