Fitch Ratings on Thursday raised its GDP growth projection for India to 7.8% for this year and 7% for 2024-25, attributing the “sizeable upward revisions” to brighter prospects for emerging markets excluding China “particularly in India”.
While raising world growth prospects for 2024 from 2.1% to 2.4%, Fitch said there are “upside risks” to its 2023-24 growth projection for India which is marginally higher than the government’s 7.6% estimate.
Terming domestic demand and investment the main driver of growth, Fitch said short term growth would outpace the economy’s estimated potential before moderating towards the trend in the coming year. Real GDP is expected to rise 6.5% in 2025-26.
The rating agency expects retail inflation to average 4% in 2024-25, from 5.7% this year, but pared its expectations of an interest rate cut from the central bank. “We now think that the RBI [Reserve Bank of India] will cut rates only in the second half of 2024 and by 50 bp (revised from 75 bp in December) in view of the stronger growth outlook,” it said.
Headline inflation, Fitch said, is expected to “steadily decrease to 4% by calendar year-end on the assumption that recent food price volatility will subside”.
