S&P Global Ratings Bullish On India: Economy Expected To Grow By 6.8 Per Cent In FY25 Despite Global Slowdown

S&P Global Ratings projects a 6.8 per cent growth for the Indian economy in financial year 2025 (FY25), driven by strong domestic demand and increased exports, with India, Indonesia, the Philippines, and Vietnam leading the growth trajectory.

Despite an anticipated mild slowdown in Asian emerging market economies, S&P remains optimistic about robust growth, maintaining its forecast unchanged for the upcoming year, as per a report by The Economic Times.

The agency expects India's economy to expand by 7.6 per cent in the current fiscal year, in line with the government's second advance estimate. This marks an increase from S&P's previous prediction of 7.2 per cent growth for FY24.

However, S&P notes that restrictive interest rates may dampen demand in the next fiscal year, and regulatory measures to control unsecured lending could impact credit growth.

Additionally, a lower fiscal deficit target is expected to moderate growth.

The government aims to reduce the fiscal deficit to 5.1 per cent in FY25 from 5.8 per cent this year, with further reduction to 4.5 per cent targeted for FY26. Growth is expected to rebound to 7 per cent in FY27, following a marginal improvement to 6.9 per cent in FY26.

S&P predicts a 5.5 per cent inflation rate for the current year, easing to 4.5 per cent in FY25. While core inflation has decreased, food inflation remains a concern, rising slightly between April 2023 and January 2024.

Regarding monetary policy, S&P believes that slowing inflation, a reduced fiscal deficit, and lower US policy rates will create conditions for the Reserve Bank of India (RBI) to start cutting rates.

However, the timing of rate cuts may be delayed until at least June 2024, depending on the path of disinflation.

S&P expects the RBI to reduce rates by 75 basis points by the end of the current fiscal year. The RBI's monetary policy committee is scheduled to meet next week.