India's Economic Engine Revs Up: S&P Global Boosts Growth Forecast to 6.8%
S&P raises FY25 GDP forecast to 6.8% for India
S&P Global, a renowned American rating agency, has revised its forecast for India's GDP growth in the fiscal year 2024-25 (FY25) to 6.8%. This uptick from its previous projection of 6.4% in November stems from robust domestic demand and a notable increase in exports.
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India Leading Growth Among Asian Emerging Markets
The Economic Outlook Asia-Pacific report by S&P Global highlights India's position at the forefront of growth among Asian emerging market economies. Alongside India, countries like Indonesia, the Philippines, and Vietnam are anticipated to demonstrate sturdy economic expansion.
India's Continuation as the Fastest-Growing Major Economy
India continues to retain its status as the world's fastest-growing major economy. The Reserve Bank of India (RBI) revised its growth forecast for FY24 to 7% from 6.5%, attributing the revision to stronger-than-expected growth in the initial two quarters of the financial year.
Fiscal Targets and Government Initiatives
The Indian government has proposed fiscal-deficit targets of 5.1% of GDP for FY25 and aims for further reduction to 4.5% or lower by FY26, signaling a commitment to fiscal consolidation. This endeavor aligns with the broader goal of reducing the deficit to approximately 3% of GDP over the next few years.
Moody's Optimistic Outlook
In line with S&P Global's optimism, rating agency Moody's has raised its GDP growth forecast for India in FY24 from 6.6% to 8%, citing robust government expenditure and domestic consumption as driving forces.
Strong Economic Performance in Recent Quarters
Recent economic data indicates a strong performance by the Indian economy, particularly in the December quarter. Growth of 8.4% surpassed expectations, with sectors like manufacturing, electricity, and construction exhibiting resilience.
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Revised GDP Growth Estimates
Both the third quarter (Q3 FY24) and second quarter GDP growth figures have been revised upward, reflecting the economy's resilience and momentum. The National Statistical Office has adjusted its estimate for FY24 GDP growth from 7.3% to 7.6%.
Outlook on Inflation and Monetary Policy
S&P Global anticipates a further decline in consumer inflation to 4.5% on average in FY25. Despite this, the agency expects the RBI to consider lowering repo rates to stimulate demand. However, the timing of rate cuts might be influenced by the trajectory of disinflation.
Retail Inflation Trends
India's retail inflation eased marginally in February, primarily driven by deceleration in prices across categories except food. Projections suggest inflation to remain slightly above 5% until May before gradually declining to 3% by July, according to SBI Research.
This upward revision in growth forecasts alongside proactive fiscal and monetary measures underscores India's resilience and potential for sustained economic expansion in the coming years.
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