Economy News

Fitch revises India’s GDP forecasts higher, expects 7% growth in FY25

In its March Outlook report, the ratings agency stated that domestic demand and private investment will drive the estimated 0.5% increase in FY25 GDP growth.

On Thursday, Fitch Ratings revised its Gross Domestic Product (GDP) growth forecast for India higher to 7% in FY25, marking a 0.5% point increase. Fitch highlighted the improved outlook for emerging markets excluding China, particularly in India, where it now forecasts growth to reach 7.8% in FY24.

As per the Fitch ratings, the domestic demand, particularly investment, will be the primary driver of growth in India, supported by sustained levels of business and consumer confidence.

The agency’s forecasts suggest that growth in the short-term will surpass the economy’s estimated potential, with activity likely to moderate towards trend in FY25, with real GDP rising by 6.5%.

The Indian government recently raised its GDP growth forecast for FY24 to 7.6% from the previous estimate of 7.3%.

In February, retail inflation in India remained unchanged at 5.1%, while core inflation measures continued to decline steadily.

“This underlines that developments in food prices will be key to inflation developments and the pace at which inflation will approach the Reserve Bank of India’s 4% mid-point of its 2-6% target band,” Fitch underlined.

Global outlook

Additionally, Fitch has reduced its forecast for China’s 2024 growth to 4.5% from 4.6%. This adjustment reflects a worsened outlook for the property sector and increasing indications of deflationary pressures.

“But the authorities have been stepping up fiscal support and this has cushioned the impact on the forecast,” Fitch said.

The rating agency has increased its 2024 global GDP growth forecast by 0.3% points to 2.4%, highlighting improved near-term world growth prospects.

In addition, the forecast for the US has been raised to 2.1% from 1.2% in its December 2023 outlook.

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