New Delhi [India], November 25 (ANI): S&P Global Ratings on Monday retained India’s GDP forecast for the current financial year 2024-25 at 6.8 per cent while cutting economic growth forecasts for the next two years.
For 2025-26 and 2026-27, the global rating agency pegged India’s GDP forecast at 6.7 per cent and 6.8 per cent, respectively, down 20 basis points (100 basis points is equal to 1 percentage point) from its previous estimates.
For 2027-28, the rating agency pegged India’s forecast at 7 per cent.
“In India we see GDP growth easing to 6.8 per cent this fiscal year (2024-25) as high interest rates and a lower fiscal impulse temper urban demand,” said S&P Global Ratings.
While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter, the rating agency added.
Reserve Bank of India last week said that the weakness witnessed in the Indian economy, particularly in the recent quarter, is behind us.
The slack in speed in the Indian economy observed in the second quarter of 2024-25 (July-September) is behind us as private consumption is back to being the driver of domestic demand with festival spending lighting up real activity in October-December, RBI had said in its latest monthly bulletin.
Indian economy grew 6.7 per cent in the April-June quarter, lower than RBI’s 7.1 per cent forecast. GDP data for July-September quarter is due at 4 pm on November 29.
The RBI has pegged India’s 2024-25 GDP growth at 7.2 per cent. IMF and World have pegged it at 7.0 per cent. Many global rating agencies and multilateral organizations have also revised their growth forecasts for India upwards.
The Economic Survey tabled in Parliament earlier this year “conservatively” projected India’s real GDP growth at 6.5-7 per cent for 2024-25, acknowledging that market expectations are higher. Real GDP growth is the reported economic growth adjusted for inflation.
India’s GDP grew by an impressive 8.2 per cent during the financial year 2023-24, continuing to be the fastest-growing major economy. The economy grew by 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22.
Persistent food inflation is delaying rate cuts by the Reserve Bank of India (RBI).
S&P Global Ratings expects the central bank to cut only once in the current fiscal year (ending March 31).
“Consumer inflation is fueled by supply shocks in agriculture, which have driven up food prices. These shocks are linked to changing rainfall patterns and climate change-driven heatwaves. Traditionally volatile and hard to predict, food inflation has become even more capricious lately. The RBI cannot ignore food inflation when considering rate cuts,” said the rating agency.
India’s consumer inflation was at 6.21 per cent in October, breaching the Reserve Bank of India’s 6 per cent upper tolerance level.
The RBI has kept the repo rate elevated at 6.5 per cent to keep inflation contained. The repo rate is the rate of interest at which the RBI lends to other banks. (ANI)
