June 19, 2024
In its Global Economic Outlook (GEO), Fitch also raised its world growth forecast for 2024 to 2.6% from 2.4%
India's economy saw an 8.2% growth in FY24, with continued but slower investment growth and a recovery in consumer spending expected for FY25
Signs of a normal monsoon season should support growth and stabilise inflation despite heatwave concerns
Fitch’s revised forecast is higher than those of the IMF and ADB, with the RBI expected to make a modest policy rate cut this year
Fitch Ratings has raised India’s growth forecast for FY25 to 7.2% from 7%, driven by strong consumer confidence expected to boost spending and investments. However, the agency cautions that the ongoing heatwave could pose risks to both growth and inflation. In its Global Economic Outlook (GEO) released on Monday, Fitch revised its forecast for global growth in 2024 to 2.6%, up from the earlier estimate of 2.4%.
India’s economy grew by 8.2% in FY24. Fitch predicts a robust 7.2% expansion in FY25, noting that while investment growth will continue, it will be slower than in recent quarters. Consumer spending is expected to recover, supported by high consumer confidence. Purchasing managers’ surveys indicate continued growth at the start of the current financial year.
Earlier this month, the Reserve Bank of India (RBI) revised the country’s GDP forecast upward by 20 basis points to 7.2%. The report also suggests a normal monsoon season could support growth and stabilise inflation, though the recent heatwave remains a potential risk. Fitch anticipates growth to slow in subsequent years, aligning with their medium-term trend estimate.
Fitch’s revised forecast for India is higher than those of the International Monetary Fund (IMF) and the Asian Development Bank (ADB). In April, the IMF adjusted its projection to 7% from 6.8%, while the ADB revised its forecast to 7% from 6.7%. S&P expects India’s economy to grow by 6.8%.
At its latest meeting, the RBI maintained the policy rate at 6.5% and confirmed its hawkish stance on reducing inflation. Fitch expects the RBI to cut the rate to 6.25% this year, followed by 25 basis point cuts in 2025 and 2026. Improved confidence in European recovery prospects, a revival in China’s export sector, and stronger domestic demand in emerging markets excluding China have contributed to the upward revision of the world growth forecast.
Source: Economic Times