Fitch raises India’s growth forecast for next fiscal to 7%


New Delhi: Rating agency Fitch has increased its forecast India's economic growth On Thursday, it estimated a 7 per cent expansion on a strong base in the next fiscal year starting April 1. domestic demand and sustained levels of business and consumer confidence with growth of 8.4 percent Gross Domestic Product (GDP) during the third quarter of the current financial year.
Fitch saw indian economy Growth at 7.8 percent in fiscal year 2023-24, slightly higher than the government's 7.6 percent forecast.
The country's economic growth has consistently outperformed quarterly forecasts, with investment growth up 10.6 per cent year-on-year and private consumption up 3.5 per cent, the agency said in its latest 'Global Economic Outlook' .
globally, Fitch Ratings has extended its 2024 global GDP growth World growth prospects are estimated at 2.4 percent in the near future due to improvement.
This revision is mainly driven by the increase in US growth forecast in the December 2023 Global Economic Outlook (GEO) to 1.2 per cent from 2.1 per cent.
“The strong US growth prospects are offset by a modest cut to our China 2024 growth forecast – from 4.6 per cent to 4.5 per cent – ​​and a modest revision to our Eurozone forecast, from 0.7 per cent to 0.6 per cent,” it said.
“Excluding China, growth in emerging markets has been lifted by 0.1 percentage point to 3.2 percent, with forecasts raised for India, Russia and Brazil.”
Looking to 2025, global growth is expected to reach 2.5 percent, with the Eurozone recovery playing a key role in real wages and consumption, but US growth slowing.
For India, Fitch Ratings said, “With GDP growth exceeding 8 per cent for three consecutive quarters, we expect growth momentum to decelerate in the final quarter of the current fiscal year, implying that fiscal The growth rate in year 24 will be 7.8 percent.” ,
The agency shows that recent data indicates faster growth in GDP than gross value-added, suggesting a possible normalization of this gap. It added that strong business survey data for January and February pose a risk to these growth estimates.
“We expect the Indian economy to continue its strong expansion, with real GDP growth forecast at 7 per cent in FY2025, an upward revision of 0.5 percentage points from our December forecast,” Fitch Ratings said.
“Amid sustained levels of business and consumer confidence, domestic demand, particularly investment, will be the main driver of growth.”
The latest forecasts suggest that in the coming months, economic growth will exceed projected potential, but will gradually ease towards a more sustainable level with real GDP growth at 6.5 per cent by FY2025.
Recent data shows that consumer price inflation has increased, mainly due to higher food prices. In December, consumer price index (CPI) inflation stood at 5.7 percent year-on-year, which fell to 5.1 percent by February.
However, key inflation indicators are on the downside. Movements in food prices, which account for about half of India's CPI, will play a key role in shaping inflation and its convergence towards the 4 per cent mid-point of the Reserve Bank of India's 2 per cent-6 per cent target band.
“We expect headline inflation to ease steadily to 4 per cent by the end of the calendar year, on the assumption that recent food price volatility will subside,” it said.
RBI has kept its key policy rate unchanged at 6.5 percent. It maintains a rigid policy stance on the need to “roll back monetary adjustment” and bring inflation down to target.
“We now think the RBI will cut rates by 50 basis points (revised from 75 basis points in December) only in the second half of 2024 given the strong growth outlook,” it said.
(with inputs from agencies)

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