S&P Global Ratings has maintained its projection for India’s GDP growth at 6.8% for the current fiscal year.
The report also said that the Reserve Bank of India (RBI) may begin cutting interest rates in its October 7-9 Monetary Policy Committee Review.
In its Asia Pacific Economic Outlook report, S&P also retained its forecast for India’s GDP growth in FY2025-26 at 6.9%, citing strong economic performance that will enable the RBI to focus on managing inflation.
For the June quarter, India’s GDP growth slowed, primarily due to high interest rates dampening urban demand, aligning with S&P’s forecast of 6.8% growth for FY2024-25. This marks a slowdown from the previous fiscal year’s growth rate of 8.2%.
S&P report said that the Indian government remains committed to fiscal consolidation, as evidenced by the Union Budget’s significant focus on infrastructure investment.
A capital expenditure allocation of Rs 11.11 lakh crore has been allocated for the fiscal year ending March 2025.
The ratings agency highlighted that food inflation continues to be a major challenge for the RBI, which has kept the benchmark interest rate steady at 6.5% since February 2023.
S&P indicated that without a sustained reduction in food price inflation, maintaining the RBI’s target inflation rate of 4% will be difficult. Nonetheless, the agency expects inflation to average 4.5% for the fiscal year.
Earlier this month, World Bank upgraded India’s GDP growth forecast to 7% from its earlier projection of 6.6%. On the similar lines, International Monetary Fund also revised the projection upwards from 6.8% to 7%.
