Fitch improves India’s FY25 GDP forecast to 7%

Short-term growth will exceed the economy's estimated potential

March 14, 2024

India's real GDP for FY25 is expected to grow by 7%, a 0.5% point upward revision

The Indian government recently raised FY24 GDP growth forecast to 7.6%

Domestic demand, especially investment, to be India's main driver of growth

The global GDP growth forecast was boosted by Fitch, with improved near-term prospects

Fitch Ratings has revised India’s gross domestic product (GDP) growth forecast upward for the ongoing and the next financial year, anticipating the economy will sustain its robust expansion. Conversely, it has lowered the forecast for China, citing the ongoing property crisis in the country.

In its March Outlook report, the rating agency disclosed that it now expects India’s real GDP for FY25 to grow by 7%, marking a 0.5% point upward revision. Fitch predicts a growth rate of 7.8% in FY24 and 7.0% in FY25 for India, which are significant upward revisions, improving prospects for EM ex-China.  

Recently, the Indian government revised the GDP growth forecast for FY24 to 7.6% from the previous 7.3%. Fitch anticipates that domestic demand, notably investment, will be the primary growth driver in India, buoyed by sustained business and consumer confidence. Fitch’s forecasts predict that short-term growth will exceed the economy’s estimated potential, with growth rates moderating towards the trend in FY25. Real GDP is expected to rise by 6.5% at that time.

Meanwhile, retail inflation in India remained at 5.1% in February, with core inflation measures consistently declining. Fitch stated that food price developments will be pivotal to inflation trends and the pace at which inflation converges toward the Reserve Bank of India’s 4% mid-point target within its 2-6% target band.

Shifting the focus to the global outlook, Fitch has lowered China’s 2024 forecast to 4.5% from 4.6%, citing a deteriorating outlook for the property sector and mounting evidence of deflationary pressures. However, Fitch noted that fiscal support from authorities has somewhat cushioned the forecast impact.

Furthermore, the rating firm has raised its 2024 global GDP growth forecast by 0.3%age points to 2.4%, highlighting an improvement in near-term world growth prospects. The US forecast has increased to 2.1% from 1.2% in its December 2023 outlook.

Source: Economic Times


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