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Moody’s India outlook: In its outlook for India’s trajectory, Moody’s Ratings has projected a growth rate of 6.6 per cent for the world’s fastest-growing economy in the fiscal year ending March 2025 (FY25). This prediction comes in the wake of a notable expansion of 8 per cent during 2023-24.
As per Moody’s, the strong economic growth is expected to fuel a substantial credit demand, particularly benefiting the Non-Banking Financial Companies (NBFCs). The projection reveals that the robust loan growth in the NBFC sector will withstand the challenges posed by increasing funding costs, thereby supporting their profitability.
Looking ahead, Moody’s anticipates a slightly moderated growth rate of 6.2 percent in the subsequent fiscal year.
“India’s economy as per our forecast is expected to expand 6.6 per cent in the year ended March 2025 (FY25) and 6.2 per cent the following year, and this will lead to robust loan growth at NBFCs, mitigating the impact of rising funding costs on their profitability,” Moody’s Ratings said. The Indian economy is estimated to have expanded 8 per cent in the 2023-24 fiscal year.
Moody’s on NBFCs
In its analysis on the non-banking finance companies, Moody’s has underlined that the robust economic conditions will help them preserve their asset quality even as a rise in interest rates increases the debt burdens of their customers. “Funding costs for NBFCs in India are rising, but strong credit demand fuelled by the country’s robust economic growth will support the sector’s profitability,” said Moody’s in its outlook, adding that robust economic conditions will help them preserve their asset quality even as rises in interest rates increase the debt burdens of their customers.
The aggregate loan growth at NBFCs on a year-on-year (YoY) basis saw an acceleration to 20.8 per cent in September 2023 from 10.8 per cent a year earlier, driven by demand for retail loans, including financing for housing and automobiles.
Furthermore, the majority of these entities are either government-owned or affiliated with large corporate groups, ensuring a certain degree of stability in their funding arrangements even during periods of financial strain, as noted by the agency.
Moody’s FY25 GDP growth estimates, while slightly more conservative than those of the RBI and other agencies, align closely with Deloitte’s projections. The RBI envisages a 7 percent expansion in the Indian economy for the current fiscal year, while the Asian Development Bank (ADB) and Fitch Ratings anticipate similar growth rates. However, S&P Global Ratings and Morgan Stanley project a marginally lower growth rate of 6.8 percent.
(With PTI inputs)
