S&P ups India’s FY’24 growth forecast to 6.4% on robust domestic momentum

S&P Global Ratings boosted India’s GDP prediction for the current fiscal year to 6.4 per cent from 6 per cent, citing strong internal momentum as offsetting headwinds from rising food prices and sluggish exports.

However, the US-based rating agency has reduced its growth forecast for the next fiscal year (2024-25) to 6.4 per cent, citing a slowing in the current fiscal’s second half (October-March) due to higher base effects and weaker global economy.

“We have revised up our projection for India’s GDP growth for fiscal 2024 (ending in March 2024) to 6.4 per cent, from 6 per cent, as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports.

“Still, we expect growth to slow in the second half of the fiscal year amid subdued global growth, a higher base, and the lagged impact of rate hikes. As a result, we have lowered our outlook for growth in fiscal 2025 to 6.4 per cent, from 6.9 per cent,” S&P said.

The Indian economy expanded by 7.2 per cent in the fiscal year 2022-23, which concluded in March 2023. In the April-June quarter, India’s GDP increased by 7.8 percent.

According to S&P’s Economic Outlook for Asia Pacific, growth this year and next will be best in developing market economies with strong domestic demand, including India, Indonesia, Malaysia, and the Philippines.

According to the report, fixed investment in India has rebounded significantly faster than private consumer expenditure.

Food inflation in India rose temporarily in the July-September quarter, but it appears to have had little impact on underlying inflation patterns.

Nonetheless, headline inflation remains over the RBI’s goal of 4 per cent, implying that the rate cycle will take some time to reverse, according to S&P.

“In Australia, India, and the Philippines, lingering inflation risks are keeping central banks occupied. The government plans to expand fiscal policies in several countries could complicate central banks’ policymaking,” S&P said.

Risks remain but so too does the potential for growth in the region. In coming months, the spotlight may shine a little more brightly on emerging markets where domestic demand is strong, the rating agency said.