Fitch revises India's FY25 GDP growth forecast to 7% from 6.5%

Fitch revises India's FY25 GDP growth forecast to 7% from 6.5%

Global ratings agency Fitch Ratings raised India's FY25 GDP growth forecast to 7 percent from 6.5 percent earlier as it expects the economy to continue its strong expansion.

Fitch expects 50 bps rate cut by the Reserve Bank of India from July to December and foresees India's CPI inflation gradually declining to 4 percent by the end of 2024. RBI has kept the repo rate unchanged at 6.5 percent for the last six consecutive meetings and has reiterated its commitment to reaching the 4 percent inflation target on a sustainable basis.

"Prospects for EM (ex China) have also brightened, particularly in India, where we now expect growth to reach 7.8 percent in the fiscal year ending March 2024 (FY24) and 7 percent in FY25, both sizeable upward revisions. With GDP growth having exceeded 8 percent for three consecutive quarters, we expect an easing in growth momentum in the final quarter of the current fiscal year, implying an estimate of 7.8 percent for growth in FY23-24," said Fitch.

"Domestic demand, especially investment, will be the main driver of growth, amid sustained levels of business and consumer confidence," Fitch said.

"Our forecasts imply that growth in the short term will outpace the economy's estimated potential, and that the pace of growth of activity will then moderate towards trend in FY25."

Meanwhile, Fitch trimmed China’s 2024 forecast, to 4.5 percent from 4.6 percent, reflecting a deterioration in the outlook for the property sector and growing evidence of deflationary pressures. However, the authorities have been stepping up fiscal support and this has cushioned the impact on the forecast, said the ratings agency in its report.

Recently, Moody's raised India's 2024 GDP growth estimate to 6.8 percent from 6.1 percent.

India’s economy grew by better-than-expected 8.4 percent in the final three months of 2023 – the fastest pace in one-and-half years, fortifying Prime Minister Narendra Modi’s record of providing a world-beating growth rate ahead of general elections.

The growth rate in October-December was higher than 7.6 percent in the previous three years, and it helped take the estimate for the current fiscal (April 2023 to March 2024) to 7.6 percent, according to the data released by the National Statistical Office (NSO) last week.