India’s growth forecast raised
The Indian economy could perform better than expected next year, with the S&P Global Ratings revising its growth forecast upwards on Monday.
The rating agency now projects India’s gross domestic product (GDP) to grow 6.4% in the financial year 2024 compared to the previous forecast of 6%, “as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports.”
The S&P’s projection for the next year is close to the figure set by India’s central bank, which expects the economy to grow 6.5% in 2024.
Although inflation in the country remains above the Reserve Bank of India’s (RBI) target of 4%, the agency believes it will not affect growth prospects.
“In India, there was a transitory spike in food inflation in the July-September quarter, but it appears to have had little effect on the underlying inflation dynamics,” S&P said in a note, adding that it expects interest rates to fall by 100 basis points by March 2024.
At the same time, the US-based rating agency lowered the country’s growth forecast for the financial year 2025 to 6.4% from its earlier prediction of 6.9%. According to S&P, the Indian economy will bounce back only in 2026-2027 “amid subdued global growth, a higher base, and the lagged impact of rate hikes” by the RBI.
The upward revision by the global rating agency follows a similar upgrade by the International Monetary Fund, which raised India’s growth forecast for the next year to 6.3% in October from 6.1% projected earlier and brings it on par with the World Bank projection of 6.3%.
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