Fitch has revised India’s FY25 real GDP forecast to 7 percent, up from 6.5 percent. The rating agency attributes this adjustment to robust domestic demand and sustained growth in business and consumer confidence, moderating its view on rate cuts.
“Increased domestic demand and confidence in both business and consumer sectors have prompted us to raise our projection for India’s economic growth,” stated Fitch. The agency now anticipates a 7 percent expansion in India’s real GDP for FY25, marking a 50 basis points increase from its previous forecast.
India’s economy exhibited strong growth in the October-December FY23 period, expanding by 8.4 percent, propelled by robust manufacturing and construction activities. Fitch predicts a moderation in growth momentum for the October-December FY24 period, with an estimated growth rate of 7.8 percent.
“Our forecast for fiscal 2024 surpasses the Indian government’s revised estimate of 7.6 percent, reflecting our optimism about India’s economic trajectory,” noted Fitch. However, RBI chief Shaktikanta Das hinted at growth potentially nearing 8 percent.
Fitch underscores domestic demand, particularly investment, as the primary growth driver, amid sustained levels of business and consumer confidence. The agency suggests that growth in the short term is likely to outpace the economy’s estimated potential, moderating towards trend in FY25.
“We expect retail inflation to steadily decrease to 4 percent by the end of this calendar year,” Fitch stated, assuming recent food price volatility will subside.
Regarding interest rates, Fitch now anticipates the RBI to cut rates only in the second half of the calendar year, revising its estimate to 50 basis points. The RBI has maintained the repo rate unchanged at 6.50 percent for the last six consecutive meetings, aiming to achieve the 4 percent inflation target sustainably.
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