Fitch raises India's growth estimates for FY25 to 7.2% as investments rise

Fitch Ratings raised India's growth forecast for the current fiscal year to 7.2%, up from the 7% projected in March, citing a recovery in consumer spending and increased investment. For FY26 and FY27, Fitch projected 6.5% and 6.2% growth rates, respectively. "We expect the Indian economy to expand by a strong 7.2% in FY25, an upward revision of 0.2 pp from the March GEO," Fitch stated in its global economic outlook report. Fitch's estimates align with the Reserve Bank of India's (RBI) recent projection, which also forecasted a 7.2% expansion in the current fiscal year, driven by improving rural demand and moderating inflation.

While investment is expected to continue rising, it will do so more slowly than in recent quarters, with consumer spending recovering due to elevated consumer confidence. According to Fitch, purchasing managers' survey data indicate continued growth at the start of the current financial year. Additionally, a normal monsoon season should support growth and stabilize inflation despite risks posed by a recent heatwave. Fitch noted that while growth in later years is expected to slow, it will approach their medium-term trend estimate, driven by consumer spending and investment. The Indian economy grew 8.2% in FY24, with a 7.8% expansion in the March quarter. Inflation is expected to decline to 4.5% by the end of 2024 and average 4.3% in 2025 and 2026. Fitch also anticipates that the RBI will cut policy interest rates by 25 basis points this year, bringing them to 6.25%.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.