Fitch Ratings raises India's potential growth to 6.4% over the next five years

Potential growth raised to 6.4% by Fitch Ratings

Indian economy could average 6.3 percent growth over the next five years, global ratings agency Fitch Ratings noted on May 22.

The rating agency projects the economy to log 6.4 percent growth in 2025, followed by 6.3 percent in 2026 and 6.4 percent in 2027.

Fitch Ratings raised India’ potential growth to 6.4 percent from 6.2 percent projected earlier.

“Our revised estimate implies that there is a stronger contribution from labour inputs (total employment) rather than labour productivity. India’s labour force participation rate has increased sharply in recent years; we expect it will continue to increase but at a slower pace,” Fitch Ratings noted.

The increase in India’s potential or target growth comes at a time when Fitch has revised emerging market potential growth.

“Our update of potential growth in emerging markets is now 3.9%, representing a further, albeit marginal drop from the 4% estimate we published in November 2023. This mainly reflects lower potential growth in China,” said Robert Sierra, Director, Fitch Ratings.

China’s lower potential, the global ratings agency, noted can be attributed to a weaker capital deepening and steeper fall in labour force participation.

China is expected to suffer the worst fate among countries due to Trump’s April tariffs. The East Asian economy is expected to witness a decline of 1.3 percentage points, compared with 0.9 percentage point shock to the US economy and 0.8 percentage point to the global economy, as per IMF’s latest report.

IMF projects Indian economy to grow 6.2 percent in FY26 and 6.3 percent in FY27 compared with 6.5 percent projected for both years in January.