After India posted a robust economic growth for the quarter ended on December 31, 2023 at 8.4 per cent, Chief Economic Advisor (CEA) Anant Nageswaran on Thursday said that agencies have a case to revise up their FY24 growth projections for India.
It is to be noted that the government has also revised FY24 estimate upwards to 7.6 per cent from 7 per cent.
Notably, Fitch has projected a 6.9 per cent GDP growth in the fiscal year ending March 2024, while domestic rating agency ICRA and Morgan Stanley Research also projected India’s economic growth at around 6.5 per cent for FY24. Furthermore, the country’s economic growth is estimated to touch 6.1% in FY24 and 6.3% in FY25, as per Moody’s, due to government’s high debt-to-GDP ratio.
S&P, meanwhile, projected India’s GDP to expand at 6.4 per cent in the current fiscal year and in the next. For 2025 it projected growth rate to rise to 6.9 per cent, followed by 7 per cent in 2026.
Earlier in December 2023, the office of the CEA said that the rating mechanism followed by credit rating agencies for developing economies needs serious reform focusing on well-defined, measurable principles rather than subjective judgements on ideas of governance.
Pointing to the improvement in India’s macro fundamentals and its dissonance with ratings, the CEA’s report had noted that macro improvements mean little in the credit rating mechanism.
At the GDP briefing, the CEA also highlighted that India continues to be an outlier in terms of GDP growth and a structural transformation of the economy is underway, both in terms of digital and physical infrastructure.
Nageswaran said that the erratic monsoon hurt FY24 farm sector growth but farm sector should rebound in FY25.
He also highlighted resilient urban demand, which is accompanied by a recovery in rural demand.
“Growth in rural demand and income is expected to pick up next fiscal with a recovery in the farm sector growth,” the CEA said.
FM’s message to Agencies
Union finance minister Nirmala Sitharaman after presenting the interim budget this year, in a message to rating agencies said that the government is not only aligning with the fiscal consolidation roadmap given earlier but is also bettering it.Sitharaman said, “We are not only aligning with the fiscal consolidation roadmap that we gave earlier but are bettering it. It is that one simple statement that every rating agency should take on board.”
Ratings agency Moody’s Investors Service had said that India has not seen significant improvement in debt affordability to justify a rethink of the country’s sovereign ratings upgrade.
