India to be fastest-growing economy over next three years: S&P Ratings

India is expected to be the fastest-growing major economy, with a projected growth rate of 6.7% for the next three years, according to a report by S&P Global Ratings. The agency kept India’s growth forecast unchanged at 6% for FY24 but expected a sharp bounce back to 6.9% in FY25 and FY26.

The Indian economy had already shown strong performance, growing at 7.2% in 2022-23. S&P Global Ratings noted that the growth in the March quarter had surpassed their expectations, leading to a revision of GDP growth for fiscal 2023 to 7.2%.

S&P Global Ratings highlighted that India, Vietnam, and the Philippines would experience the fastest growth, reaching approximately 6%. They also predicted that growth in the region, excluding China, would improve to 4.4% in 2024 due to easier monetary conditions and better global growth. The report emphasized strong investment momentum and domestic resilience in India.

Regarding inflation, S&P projected a decrease in fuel and core inflation due to softer crude prices and the tempering of demand. They expected 5% inflation in FY24, assuming a normal monsoon, with a further decline to 4.5% over the following two years. According to the report, S&P Global Ratings believed the inflation and rate hike cycles had peaked. Still, they anticipated the Reserve Bank of India to cut rates only in early 2024 to ensure consumer inflation aligns with the target range of 4%.

S&P Global Ratings predicted that interest rates would fall to 6.25% by the end of this year and decrease by another percentage point over the next year. However, they did not expect rates to fall below 5% in the medium term.

In June 2023, the Reserve Bank of India held the policy rate steady at 6.5% for the second consecutive meeting. Economists anticipated that the monetary policy committee would maintain rates in its August meeting. Since May 2022, the policy rate has been raised by 2.5 percentage points.

Source: Economic Times