India’s Speed Wobble

Image source: Midjourney AI

What's going on?

Data out on Tuesday showed India’s economic growth slowed down last quarter.

What does this mean?

It seems two major culprits were to blame for India’s tepid growth. Suspect A: interest rate hikes, which dented demand and pushed consumer spending – which makes up over half of the economy – down to 2.1% growth, a sharp dropoff from 8.8% the quarter before. And Suspect B: the flagging manufacturing sector, which shrank for the second time in a row as profit margins took a hit and weakening global demand shook exports. The end result was that overall growth came in at 4.4% – slower than expected, and down from 6.3% the quarter before. That hasn’t got the Indian government worried, mind you: it thinks a 7% uptick is in the cards for the fiscal year ending in April, despite upcoming hikes and the unsteady global economy.

Why should I care?

The bigger picture: India in the driver’s seat.
That said, India might be right to bet on itself: by some estimates, the country’s more populous than China, with a younger median age to boot – meaning there’s plenty of firepower to fuel growth. And it helps that businesses like Apple are increasingly diversifying into India too, given China’s lengthy Covid disruptions and ongoing tensions with the US. That could be why Morgan Stanley sees the nation becoming the world’s third-biggest economy by 2027.

For markets: Promise aplenty.
Investors and funds alike have been salivating over India, and the country’s stock market performance has made the US’s seem pretty inadequate over the past year. And with all this talk of the country’s shining future – plus forecasts of 11% annual growth – Indian stocks might just be a savvy buy for your portfolio too.

Originally posted as part of the Finimize daily email.

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