Fitch raises India’s FY25 growth forecast to 7%

Fitch’s Revised Growth Forecast for India:

Fitch Ratings raised India’s GDP growth prediction for fiscal year 2024 to 7.8% and for 2025 to 7.0 percent.
This higher revision is linked to solid economic growth, which is primarily driven by domestic demand and investment.
India’s real GDP growth has routinely outpaced quarterly estimates, with significant increases in investment and private consumption.

India’s economic growth is being driven by strong domestic demand as well as sustained levels of corporate and consumer confidence.
Fitch anticipates domestic demand, particularly investment, to remain the primary growth engine, surpassing the economy’s short-term potential.
Comparison to the Global Economic Outlook:
Fitch has boosted its 2024 global GDP growth prediction to 2.4%, citing improving short-term global economic prospects.
The agency emphasizes a 2.1% boost in the US growth prediction, as well as minor revisions to China and the eurozone forecasts.
Emerging markets, excluding China, are predicted to grow, with India, Russia, and Brazil receiving higher estimates.

While the growth forecast for India appears favorable, there are difficulties and dangers to consider, such as probable normalization of the gap between GDP and gross value-added.
Food price volatility and inflation will have a significant impact on economic conditions and the Reserve Bank of India’s monetary policy decisions.

Monetary Policy Outlook:

Retail inflation in India was constant at 5.1% in February, with core inflation indicators continuing their decrease.
Fitch anticipates headline inflation to fall steadily to 4% by the end of the calendar year, assuming recent food price volatility has subsided.
The RBI has left its benchmark policy rate constant at 6.5% and continues a hawkish policy stance, trying to push inflation closer to target.

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