Fitch Ratings increases India’s GDP forecast to 7.2% in FY25

Update: 2024-06-18 15:52 GMT
The rating agency’s growth and inflation forecast are in line with the central bank’s estimates. For the fiscal years 2025-26 and 2026-27, Fitch projected growth rates of 6.5 per cent and 6.2 per cent, respectively.( DC File Photo)

Mumbai: Global rating agency Fitch Ratings upped India’s growth forecast for the current fiscal to 7.2 per cent, up from 7 per cent projected in March due to a recovery in consumer spending and increased investment.

The rating agency’s growth and inflation forecast are in line with the central bank’s estimates. For the fiscal years 2025-26 and 2026-27, Fitch projected growth rates of 6.5 per cent and 6.2 per cent, respectively.

In its global economic outlook report, Fitch said, “We expect the Indian economy to expand by a strong 7.2 per cent in FY24/25, an upward revision of 0.2 percentage points from the March Global

Economic Outlook (GEO).”

It noted that high frequency indicators of domestic activity were showing resilience. The South-West monsoon is expected to be above normal, which augurs well for agriculture and rural demand. Coupled with sustained momentum in manufacturing and services activity, this should enable a revival in private consumption.

RBI earlier this month projected a 7.2 per cent growth for the current fiscal year, supported by improving rural demand and moderating inflation.

In its latest biannual Global Economic Prospects it said India will remain the fastest-growing of the world’s largest economies, although its pace of expansion is expected to moderate. After a high growth rate in FY 2023/24, steady growth of 6.7 per cent per year, on average, is projected for the three fiscal years beginning in FY 2024/25.

The rating agency said that the investment will continue to rise, albeit more slowly than in recent quarters. Consumer spending is expected to recover, supported by high consumer confidence.

“We expect growth in later years to slow and approach our medium-term trend estimate,” Fitch added, indicating that growth will be driven by consumer spending and investment.

An ‘above normal’ monsoon forecast for June-September is expected to mitigate risks of food price spikes. Fitch projects that headline inflation in India will decrease to 4.5 per cent by the end of 2024, averaging 4.3 per cent in 2025 and 2026.

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