Synopsis: Fitch Ratings has increased India's growth forecast for FY24/25 to 7.2 percent, up from 7 percent, citing a recovery in consumer spending and elevated investment. Consumer confidence is expected to drive spending, while investment growth will continue but at a slower pace. A normal monsoon season should aid growth and stabilize inflation, though there are concerns about the recent heatwave.
Fitch predicted that investment in India will continue to rise, though at a slower pace than in recent quarters.
Consumer spending is expected to recover, buoyed by elevated consumer confidence.
On Tuesday, Fitch Ratings raised India’s growth forecast, highlighting the recovery in consumer spending and increased investment.
The agency revised India’s growth forecast from 7 percent in March to 7.2 percent.
It also projected a growth rate of 6.5 percent for the fiscal year 2025-26 and 6.2 percent for 2026-27.
In its global economic outlook report, Fitch stated, "We expect the Indian economy to expand by a strong 7.2 percent in FY24/25 (an upward revision of 0.2 percentage points from the March GEO).”
The report predicted continued but slower investment growth and a recovery in consumer spending due to heightened consumer confidence.
According to purchasing managers' survey data, growth is expected to continue at the start of the current financial year.
Additionally, a normal monsoon season should support growth and stabilize inflation, though there are concerns about potential risks from the recent heatwave.
Fitch also anticipates the Reserve Bank of India (RBI) will cut policy interest rates by 25 basis points this year, bringing them to 6.25 percent.
Fitch expects growth to slow in the coming years, approaching its medium-term trend estimate, driven by consumer spending and investment.
This projection aligns with the Reserve Bank of India's estimated GDP growth of 7.2 percent for 2024-25.
RBI Governor Shaktikanta Das projected real GDP growth for 2024-25 at 7.3 percent in Q1, 7.2 percent in Q2, 7.3 percent in Q3, and 7.2 percent in Q4.
The Indian economy grew by 8.2 percent in the fiscal year 2023-24, with a 7.8 percent expansion in the March quarter.
Fitch also raised its world growth forecast for 2024 to 2.6 percent from 2.4 percent, as mentioned in the March 2024 Global Economic Outlook.
China's growth outlook has been revised to 4.8 percent from 4.5 percent.
However, for 2025, Fitch forecasts global growth to edge down to 2.4 percent as US growth slows to a below-trend rate of 1.5 percent, and growth in the eurozone picks up to 1.5 percent.
It also expects China's growth to fall to 4.5 percent next year as exports and government spending decelerate.
In conclusion, Fitch Ratings has revised its growth forecast for the Indian economy, predicting a robust expansion of 7.2 percent for FY24/25, up from the previous 7 percent estimate.
This upward revision is driven by a recovery in consumer spending and increased investment, though the pace of investment growth is expected to slow.
Despite potential risks such as heatwaves, a normal monsoon season is anticipated to support economic growth and stabilize inflation.
Looking ahead, growth is projected to moderate, aligning with medium-term trends, with consumer spending and investment continuing to be key drivers.
This forecast aligns with the Reserve Bank of India's projections, underscoring a positive outlook for India's economic performance amidst global economic adjustments.
