India's quarterly growth rate falls to a nearly two-year low, far below forecasts.

• India's economy grew by 5.4% in its second fiscal quarter ending September.
• While economists surveyed by Reuters predicted growth of 6.5% for the time frame, the Reserve Bank of India forecasted an increase of 7%.
• Alicia Garcia Herrero, the head economist for the Asia-Pacific region at Natixis, stated that India's economy will experience a slowdown but will not collapse in 2025.

The Indian economy grew at a slower-than-expected rate of 5.4% in the second quarter ending September, which is close to a two-year low.

The print growth rate of 6.7% is the lowest since the last quarter of 2022, despite economists forecasting 6.5% growth and the Reserve Bank of India expecting 7%.

The manufacturing and mining sectors are experiencing slow growth, according to the country's statistics agency.

The yield on the country's 10-year sovereign bond rapidly dropped to 6.74% following the release, down slightly from approximately 6.8%.

The weak GDP reading may impact the country's interest rate path, as the RBI's Monetary Policy Committee meets between Dec. 6-8. Market observers had anticipated an eleventh consecutive pause by the RBI, with the repo rate currently at 6.5%.

Capital Economics' assistant economist, Harry Chambers, stated that the Friday reading indicated "broad-based weakness." His firm anticipates that economic activity will "struggle" in the upcoming quarters.

The recent increase in inflation strengthens the argument for policy relaxation, but the Reserve Bank of India may not be ready to reduce interest rates for some time due to this increase.

Before the GDP release, Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis, predicted that India's economy will experience a slowdown but not a collapse in 2025.

Natixis predicts a 6.4% growth forecast for India in 2025, which could range from 6% to 6.4%, but this is not a significant issue.

The RBI forecasts a 7.2% GDP growth rate for the 2024 fiscal year, ending in March 2025.

Herrero stated that India is not at the center of the value chain reshuffling that China has been conducting under President-elect Donald Trump's second presidency.

If I were the Trump administration, I would consider imposing tariffs on Vietnam, as it is a more evident scenario, she remarked.

She suggested that China could produce goods in India for domestic use, thereby sparing New Delhi from tariffs.