Fitch Ratings recently upgraded India’s economic growth forecast for the current fiscal year, which means the period from April 2024 to March 2025. Fitch has raised India’s growth estimate to 7.2%, up from their previous estimate of 7%. This revision is due to consumer spending improvements and higher investment levels across various sectors.
Moreover, Fitch has projected growth rates of 6.5% and 6.2% for the fiscal years 2025-26 and 2026-27, respectively. This indicates Fitch’s expectations for the pace of economic expansion in India over the next few years, reflecting their assessment of factors like consumer behavior, business investment trends, and overall economic conditions.
Similarly, the Reserve Bank of India (RBI) has also projected a growth rate of 7.2% for the current fiscal year, highlighting factors such as rising rural demand and a stabilization in inflation rates.
Why did Fitch Raise its Growth Estimate for India?
Fitch Ratings has highlighted that while investment in India will continue to increase, the pace of growth will be slower compared to recent quarters. They also anticipate a recovery in consumer spending, supported by higher consumer confidence levels.
According to Fitch, data from purchasing managers’ surveys indicate ongoing growth as the current financial year begins. They mentioned that the upcoming monsoon season, expected to be normal, should bolster economic growth and stabilize inflation, although a recent heatwave poses some risks.
Looking ahead, Fitch expects growth to slow gradually in the coming years, approaching their medium-term trend estimate. They emphasized that robust consumer spending and sustained investment will drive future economic expansion.
Fitch’s Future Outlook for India
In the fiscal year 2023-24, the Indian economy grew by 8.2%, showing strong expansion. Notably, there was a significant growth of 7.8% in the last quarter of March. Fitch Ratings predicts that inflation in India will decrease to 4.5% by the end of 2024. They expect inflation to average 4.3% in both 2025 and 2026.
Fitch also anticipates that the Reserve Bank of India (RBI) will lower its policy interest rates by 25 basis points this year, bringing it down to 6.25%. This adjustment will stimulate economic activity and support growth in the country.
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