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Category :
Economy
Headline :
S&P ups India growth forecast to 6.8% for FY'25
Date:
26/03/2024 12:27
On Tuesday, S&P Global Ratings revised India's growth projection for the upcoming financial year to 6.8%, yet expressed concerns about restrictive interest rates hampering economic expansion. The Indian economy is believed to have grown by 7.6% in the current fiscal year.
Previously, in November of the previous year, the US-based agency had anticipated India's growth to be 6.4% for the 2024-25 fiscal year, based on strong domestic momentum.
S&P's Economic Outlook for the Asia Pacific stated, "For Asian emerging market (EM) economies, we generally forecast strong growth, with India, Indonesia, the Philippines, and Vietnam leading the way."
The impact of elevated interest rates and inflation on household purchasing power has curtailed sequential GDP growth in primarily domestic demand-driven economies like India, Japan, and Australia, according to S&P.
"We anticipate India's real GDP growth to decelerate to 6.8% in the fiscal year 2025 (ending March 2025)," S&P remarked.
The report highlighted that stringent interest rates are expected to suppress demand in the next fiscal year. Regulatory measures to control unsecured lending will also impede credit growth. A reduced fiscal deficit is another factor that could hinder growth, S&P added.
"Despite our projection of a modest slowdown in Asian EM economies, we foresee strong domestic demand growth and an increase in exports propelling robust growth, with India, Indonesia, the Philippines, and Vietnam at the forefront," S&P commented.
S&P predicted rate cuts of up to 75 basis points in India for this fiscal year. "Consistent with our expectations for US policy rates, we anticipate these adjustments to mostly occur in the latter half of the year," the report stated.
In India, declining inflation, a diminished fiscal deficit, and lower US policy rates will pave the way for the Reserve Bank of India to initiate rate cuts. However, S&P believes that a clearer picture of the disinflation trajectory might delay this decision until at least June 2024 or even later.
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