Fitch Ratings Upgrades India's Growth Forecast To 7.2% For FY25
Agency attributes upward revision to elevated consumer confidence boosting spending levels and a rise in investments across sectors.
Fitch Ratings revised India's growth forecast for the ongoing financial year from 7% projected in March to 7.2%. In its latest global economic outlook report released on Tuesday, the agency attributed this upward revision to elevated consumer confidence boosting spending levels and a rise in investments across sectors.
Fitch anticipates inflation in India to ease to 4.5% by the year's end. In an update to its global economic outlook report, the agency also expects the Reserve Bank of India to cut policy interest rates by 25 basis points to 6.25%.
Fitch's estimates for FY25 are in line with that of the RBI which earlier this month projected Indian economy to expand 7.2% in the current fiscal on the back of improving rural demand and moderating inflation.
The Indian economy grew 8.2% in the year ended March 2024, expanding 7.8% in the March quarter.
The growth rate projected by the Asian Development Bank is 7%, while S&P Global Ratings and Morgan Stanley forecast a growth rate of 6.8%. Moody's Ratings and Deloitte India predict that India's GDP will increase by 6.6% during 2024-25.
Investment will continue to rise but more slowly than in recent quarters, while consumer spending will recover with elevated consumer confidence, Fitch said. For 2025-26 and 2026-27, it has projected growth rates of 6.5% and 6.2%, respectively.
Fitch said the purchasing managers survey data point to continued growth at the start of the current financial year. It said signs of the coming monsoon season being more normal should support growth and make inflation less volatile, though a recent heatwave poses a risk.
"We expect growth in later years to slow and approach our medium-term trend estimate," it said, adding growth will be driven by consumer spending and investment.
Consumer price inflation has only edged down since the start of the calendar year, with annual inflation at 4.7% in May from 5.7% in December 2023.
According to official forecasts, rainfall during June-September is likely to be above average, Fitch said, adding that this should limit the inflationary risks from food price spikes.
"We expect headline inflation to continue declining to 4.5% by calendar year-end, and average 4.3% in 2025 and 2026, staying slightly above the midpoint of its target range (4%+/- 2%)," Fitch said.
As per government data, retail inflation in May eased to 1-year low of 4.75%.
