Rating agency Fitch expects India to be among the fastest-growing nations in the world in the next fiscal, with resilient GDP growth of 6.5 percent in 2024-25. In the current fiscal, Fitch pegs India’s GDP to grow 6.9 percent.
“Demand will remain strong for cement, electricity, and petroleum products, with high-frequency data in 2023 sustained at well above pre-Covid-19 pandemic levels,” Fitch Ratings said in a report released on December 22.
“India's rising infrastructure spending will also boost steel demand. Car sales will continue to rise, despite our expectation of moderation after robust growth in 2023,” it stated in the report.
At present, India is the world’s fifth-largest economy, coming after the United States, China, Germany, and Japan. By 2030, India's GDP is projected to exceed Japan's, making it the second-largest economy in the Asia-Pacific region.
According to Fitch, India’s robust economic growth will boost demand at corporations, despite weakness from slowing growth in key overseas markets. Input cost pressure is also projected to ease and together, these factors will contribute to boosting profits in the fiscal ending March 2025 by 290 basis points above the 2022-23 levels. This, in turn, will help companies maintain adequate rating headroom, despite higher capital expenditure, the ratings agency stated.
Fitch also spoke about India's IT sector, which is a big contributor to GDP. It said that slowing demand in the US and the eurozone is likely to moderate sales growth for IT services in the country, but a corresponding easing of employee attrition and wage pressure should underpin higher profitability.
Rising demand in the economy will help maintain industry balance in the cement and steel sectors, despite a faster pace of new capacity additions, the rating agency added.
“We believe India's structural demand visibility, supply-side reform by the government and healthier corporate and bank balance sheets will enable a further increase in capex across most sectors following an uptick in FY23,” Fitch said.
Notably, the International Monetary Fund (IMF) has pegged India’s growth at 6.3 percent in the current financial year 2023-24 and the next. Goldman Sachs Research projected India's growth rate to be the highest among 13 large economies in 2024, at 6.2 percent. S&P also projected India's GDP to grow 6-7.1 percent annually in fiscal years 2024-2026. The RBI, too, recently raised India’s GDP growth forecast for the financial year 2023-24 by 50 basis points to 7 percent. This upward revision came on the heels of India reporting more-than-expected July-September quarter growth, at 7.6 percent.
(With ANI inputs)
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