Fitch Ratings, Thursday, raised India’s FY25 growth forecast to 7% from 6.5% projected earlier, projecting investment to be a significant driver of growth.
“Domestic demand, especially investment, will be the main driver of growth, amid sustained levels of business and consumer confidence,” the global ratings agency noted. India’s economy recorded an over 8% growth rate in the first three quarters of the year, buoyed by double digit manufacturing and investment growth in the previous two quarters.
Fitch projects economy to grow 7.8% in FY24, higher than 7.6% estimated by the government.
“Strong business survey data for January and February represent an upside risk to these estimates,” Fitch said. RBI Governor in a recent interview noted that the economy could be close to 8% in FY24.
For FY26, Fitch projects growth to ease to 6.5%.
“Our forecasts imply that growth in the short term will outpace the economy’s estimated potential, and that the pace of growth of activity will then moderate towards trend,” it said.
Inflation is likely to cool down to 4% by the end of next fiscal and stay there by FY26. Inflation remained almost unchanged at 5.09% in February, as high food inflation kept the retail inflation from falling further.
“We expect headline inflation to steadily decrease to 4% by calendar year-end on the assumption that recent food price volatility will subside,” Fitch said.
It further noted that RBI will likely cut rates in the second half of 2024. Fitch highlights that the quantum of cut will be lower than earlier estimated at 50 bps.
The monetary policy committee will likely hold the policy rate at 6.5% for the seventh consecutive time at its meeting next month.
Fitch raised global growth forecast to 2.4% from 2.1% projected earlier, on back of stronger US growth.
