Fitch Ratings has raised India’s GDP growth projection for the current financial year to 7.2% from 7% estimated earlier, mainly due to the assumption of recovery in consumer spending.
In its June ‘Global Economic Outlook’ report, the global ratings agency said that investments will continue to rise but “more slowly” than in recent quarters in FY25, while consumer spending will “recover with elevated consumer confidence”.
Fitch’s projection of growth is in line with the Reserve Bank of India’s (RBI) forecast of 7.2% for the current fiscal, and much higher than the International Monetary Fund’s (IMF) projection of 6.8%. Most economists, however, expect the growth to be sub-7% in FY25.
“Purchasing managers survey data point to continued growth at the start of the current financial year,” Fitch 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,” it said. For FY26, and FY27, Fitch expects GDP growth to slow down to 6.5% and 6.2%, respectively.
In FY24, India’s economy had grown at a robust 8.2%. Fitch said that falling indirect taxes net of subsidies have boosted GDP growth relative to gross value-added (GVA) at basic prices (in FY24). “The latter is currently a better guide to underlying momentum and has been growing at just over 7%,” it said. In FY24, the GVA grew by 7.2%.
On retail prices, Fitch said that due to a likelihood of above-normal rainfall in June-September period, inflation will moderate, and decline to 4.5% by calendar year-end. The RBI has projected retail inflation to average 4.5% in FY25. Moreover, In both 2025 and 2026, respectively, Fitch sees CPI inflation averaging 4.3%.
Fitch expects the RBI to cut the repo rate “only once” this fiscal by 25 basis points. Currently the repo rate stands at 6.5%.
On global economy, the ratings agency raised its forecast for world growth in 2024 to 2.6% from 2.4% earlier. It raised China’s growth forecast by 30 bps to 4.8%, but kept US’ growth projection unchanged at 2.1%.
“However, for 2025, we forecast world growth to edge down to 2.4% as US growth slows to a below-trend rate of 1.5% and growth in the eurozone picks up to 1.5%,” it said.
