Fitch, a leading rating agency, has revised India's GDP estimates upwards for the financial year 2024-25, forecasting a growth rate of 7 percent, up from the previous estimate of 6.5 percent. This increase is attributed to robust growth in domestic demand and sustained positive sentiment among businesses and consumers.
The agency emphasized that investment, coupled with domestic demand, will be pivotal in driving economic expansion. India's GDP growth for the third quarter of the current fiscal year (October to december 2023) stood at an impressive 8.4 percent, surpassing expectations. Consequently, various rating agencies and financial institutions are revising their growth forecasts upwards for the upcoming fiscal year.
Fitch anticipates that India's GDP growth for the fiscal year 2023-24 could reach 7.8 percent, exceeding the government's estimate of 7.6 percent. However, growth is expected to moderate slightly in the fourth quarter of the current fiscal year, dropping to around 7.8 percent.
Regarding inflation, Fitch noted a recent uptick due to rising food prices, with retail inflation reaching 5.7 percent in december 2023 before moderating to 5.1 percent in february 2024. The agency believes that achieving the RBI's target of 4 percent inflation hinges on stabilizing food prices. As such, Fitch anticipates a potential 50-basis point reduction in policy rates by the RBI in the latter half of 2024.
On the global front, Fitch has raised its forecast for global economic growth in 2024 by 0.3 percent to 2.4 percent, indicating a more optimistic outlook for the world economy. These projections underscore the resilience and potential for growth in both the indian and global economies, albeit amid ongoing uncertainties and challenges.
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