S&P ups India growth forecast to 6.8% for FY'25

In largely domestic demand-led economies such as India, Japan, and Australia, the impact of higher interest rates and inflation on household spending power reduced sequential GDP growth in the second half, S&P said.

"We expect India's real GDP growth to moderate to 6.8 per cent in fiscal year 2025 (ending March2025)," S&P said.
Restrictive interest rates are likely to weigh on demand next fiscal year, while regulatory actions to tame unsecured lending will affect credit growth. A lower fiscal deficit will also dampen growth, it added.

"Even as we expect a mild slowdown in Asian EM economies, we generally see solid domestic demand growth and a pick-up in exports to drive robust growth, with India, Indonesia, the Philippines and Vietnam in the lead," S&P said.

It said high real policy rates will choke demand and are therefore likely to strengthen the case for lowering rates.

S&P said it forecast rate cuts of up to 75 basis points in India this fiscal. "In line with our projection for US policy rates, we largely expect these moves to occur in the second half of the year," it said.

In India, slowing inflation, a smaller fiscal deficit and lower US policy rates will lay the ground for the Reserve Bank of India to start cutting rates. But we believe more clarity on the path of disinflation could push this decision at least to June 2024, if not later, S&P added. PTI JD DRR