Ratings Agency Moody’s on Monday lowered India’s economic growth forecast to 7% for the fiscal year ending March 2025, down from 8.2% recorded in the previous fiscal year. This revision comes amidst a broader slowdown in global and domestic economic trends.
In its latest report, Moody’s stated, “We expect India’s economy to grow by 7% in FY 2024 (year to March 2025), down slightly from 8.2% the previous year. However, the robust economy will continue to drive premium growth.”
India’s GDP per capita at purchasing power parity increased by 11% year-on-year to $10,233 in FY 2023, as per the report.
The downgrade follows a similar revision by the Federation of Indian Chambers of Commerce and Industry (FICCI). Last Thursday, FICCI reduced its GDP growth estimate for FY 2024-25 to 6.4% from the earlier projection of 7%. The Economic Outlook Survey by FICCI noted, “The numbers align with expectations and reflect a notable slowdown compared to 8.2% GDP growth recorded in 2023-24.”
Adding to the trend, the Asian Development Bank (ADB) had also revised India’s GDP growth projections in December. ADB lowered its forecast for FY 2024 to 6.5%, citing weaker industrial growth and slower government spending. It further revised its projection for FY 2025-26 to 7% from the earlier 7.2%, attributing the downgrade to subdued private investment and the effects of tight monetary policies on housing demand.
“The forecast for FY2025 has been reduced slightly due to lower-than-expected growth in private investment and housing demand, impacted by tight monetary policy aimed at combating inflation,” ADB stated in its outlook.
The revised forecast comes as India’s fiscal second-quarter growth slowed more than expected to 5.4%, with industrial output rising just 3.6% year-on-year. Growth in agriculture and services sectors remained strong at 3.5% and 7.1%.
The downward revision in growth forecast tracks the Reserve Bank of India lowering India’s economic growth projection to 6.6% from 7.2% for FY25 in December 2024.
India’s economic trajectory continues to face challenges from geopolitical uncertainties affecting supply chains and adverse weather conditions, further complicating recovery efforts.