India’s economy during FY25 will expand by 7 percent: Fitch Ratings

The rating agency expects a 50 bps interest rate cut by the Reserve Bank of India (RBI) from July to December 2024. Also, as per Fitch, India's CPI inflation will gradually decline to 4 percent by the end of this year.

Fitch Ratings revises India GDP forecast for FY25 (File Image)

Expecting a strong expansion in the Indian economy next fiscal year, Global ratings agency Fitch Ratings on Thursday (March 14) raised India’s FY25 GDP growth forecast to 7 per cent from 6.5 per cent earlier.

“Prospects for EM (ex China) have also brightened, particularly in India, where we now expect growth to reach 7.8 percent in the fiscal year ending March 2024 (FY24) and 7 per cent in FY25, both sizeable upward revisions. With GDP growth having exceeded 8 per cent for three consecutive quarters, we expect an easing in growth momentum in the final quarter of the current fiscal year, implying an estimate of 7.8 per cent for growth in FY23-24,” Fitch said in its latest report.

The rating agency expects a 50 bps interest rate cut by the Reserve Bank of India (RBI) from July to December 2024. Also, as per Fitch, India’s CPI inflation will gradually decline to 4 per cent by the end of this year.

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Earlier, another prominent ratings agency Moody’s, had increased GDP forecast of India to 6.8 per cent.

“India’s real GDP expanded 8.4% year-over-year in the fourth quarter of calendar year 2023, resulting in 7.7% growth for full-year 2023. We believe that with global headwinds fading, the Indian economy should be able to comfortably register 6-7% real GDP growth and we therefore forecast around 6.8% growth in calendar year 2024, followed by 6.4% in 2025.”

The revision in India’s GDP forecasts comes roughly two weeks after official data showed the country’s GDP expanded 8.4 per cent in the October-December period, as against what most economists had expected.

Fitch, on the other hand, had trimmed China’s 2024 forecast by 0.1 per cent to 4.5 per cent, reflecting a deterioration in the outlook for the property sector and growing evidence of deflationary pressures.
However, the authorities have been stepping up fiscal support and this has cushioned the impact on the forecast, said the ratings agency in its report.