Ratings agency S&P Global has raised India’s gross domestic product (GDP) growth projection for the current fiscal to 6.4% on robust domestic growth.
The ratings firm’s revision follows a similar change by the International Monetary Fund (IMF), which raised India’s growth outlook for FY24 last month from 6.1% earlier, bringing it in line with the World Bank and the Asian Development Bank’s forecast of 6.3%, and close to RBI’s estimate of 6.5%.
“We have revised up our projection for India’s GDP growth for FY24 to 6.4%, from 6%, as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports,” S&P said in its outlook for Asia-Pacific.
The rating agency, however, lowered the FY25 growth estimate to 6.4% from 6.9%, expecting growth to slow in the second half of the fiscal amid a subdued global expansion, a higher base, and the lagged impact of interest rate hikes.
In October, the World Bank said India’s economic growth will remain resilient despite global challenges, adding that India was one of the fastest-growing major economies in FY23.
S&P said it will take some time for India’s interest rate cycle to turn as headline inflation remains over RBI’s comfort zone. “In India, there was a transitory spike in food inflation in July-September, but it appears to have had little effect on the underlying inflation dynamics,” it said.
Morgan and Stanley wrote in a note last week that India could become the first Asian nation to decrease interest rates, by next June.
“In Australia, India, and the Philippines, lingering inflation risks are keeping the central banks occupied. Government plans to expand fiscal policies in several countries could complicate the central bank’s policymaking,” S&P said.
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