Fitch Ratings on Tuesday upgraded India’s growth forecast for the current fiscal, FY2024-25 to 7.2 per cent, a revision from 7 per cent projected in March 2024, on recovery in consumer spending with elevated consumer confidence even as investment continues to rise but more slowly than in recent quarters.
In an update to its global economic outlook report, Fitch said it expects inflation to decline to 4.5 per cent by end of this year and RBI to cut policy interest rates by 25 basis points to 6.25 per cent.
The rating agency expects growth in later years to slow and approach its medium-term trend estimate, forecasting real GDP growth of 6.5 per cent in FY26 (unchanged from March), and 6.2 per cent in FY27, driven by consumer spending and investment.
Reflecting back on the final quarter of the financial year ending March 2024, Fitch Ratings notes that India’s real GDP increased by 7.8 per cent yoy, terming it higher than its expectation in March, although slower than previous quarters of the financial year.
For FY23-24, real GDP expanded 8.2 per cent with domestic demand driving growth, and investment rising by 9.0 per cent and consumer spending by 4.0 per cent.
Falling indirect taxes net of subsidies have boosted GDP growth relative to gross value-added at basic prices. The latter is currently a better guide to underlying momentum and has been growing at just over 7 per cent.
The rating agency cites purchasing managers survey data pointing to continued growth at the start of the current financial year and expects that signs of the coming monsoon season being more normal, should support growth and make inflation less volatile, though a recent heatwave poses a risk.
Fitch notes that consumer price inflation has only edged down since the start of the calendar year.
