Fitch raises FY25 India GDP growth forecast to 7.2 per cent

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Fitch raises FY25 India GDP growth forecast to 7.2 per cent

NEW DELHI: Fitch Ratings has increased India’s growth forecast for FY25 to 7.2% from 7%. This is due to high consumer confidence expected to boost spending and investments. However, they warned that the ongoing heatwave could threaten both growth and inflation.

In its Global Economic Outlook (GEO) released on Monday, Fitch Ratings increased its 2024 world growth forecast from 2.4% to 2.6%. India’s economy grew by 8.2% in FY24. Fitch expects India’s economy to grow by 7.2% in FY25, which is a 0.2% increase from its previous estimate in March. The agency noted that investment will keep rising but at a slower pace than in recent quarters, while consumer spending will improve due to high consumer confidence. Data from purchasing managers surveys indicate continued growth at the beginning of the current financial year.

Earlier this month, the RBI increased the country’s GDP forecast by 0.2% to 7.2%. The report noted that a normal monsoon season should help boost growth and stabilize inflation, though a recent heatwave poses a risk. “We expect growth in future years to slow down and align with our medium-term trend estimate,” it said.

Fitch Ratings’ revised forecast is higher than those of the International Monetary Fund (IMF) and the Asian Development Bank (ADB). In April, the IMF raised its projection to 7% from 6.8%, and the ADB increased its projection to 7% from 6.7%.

S&P expects India’s economy to grow by 6.8%. At its latest meeting, the RBI kept the policy rate at 6.5% and maintained its strict approach to reducing inflation. “We still expect the RBI to lower the policy rate to 6.25% this year, but only once,” said Fitch Ratings.

In its March GEO, it expected a 50 basis points cut this year. “We then anticipate 25 basis points cuts in both 2025 and 2026,” it added. As confidence in Europe’s recovery grows, the world growth forecast has been raised. Meanwhile, China’s export sector is improving, and domestic demand in emerging markets, excluding China, is gaining strength.

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