S&P Retains India Growth Outlook for FY24 at 6%

With the global economy weakening, increased risks from a below-average monsoon, and the delayed effect of rate hikes, S&P Global Ratings maintained its projection for India's GDP in FY24 at 6%. Inflation was also predicted to rise in FY24 by the ratings firm.

India's GDP grew by 7.8 percent in the first quarter of its fiscal year, which ran from April to June, thanks to robust demand for services and the government's persistent push to increase spending on infrastructure.

According to S&P, "Capital expenditure growth was notably strong in Australia, India, Malaysia, and New Zealand," as was reported in the Economic Outlook Asia-Pacific Q4 2023 report. The global ratings agency has revised its inflation forecast for FY24 upward to 5.5% from 5%, meaning that any rate reduction will be delayed until FY25 at the earliest.

According to the research, "in India, consumer inflation was 6.8% in August, above the Reserve Bank of India's upper tolerance limit of 6%." This number is the result of a combination of rising global oil and food costs and soaring vegetable prices.

According to S&P's latest forecast, the RBI will reduce rates in FY25 to 5.5 % by the end of the next fiscal year. It had previously planned a rate lowering of 0.25 percentage points by the end of FY24, followed by another reduction of 0.25 percentage points in FY25.

Experts predict that the Reserve Bank will keep the policy rate steady at 6.5% during its meeting next week. Rates have been left unchanged by the Fed for the past three policy sessions.

The RBI highlighted decreasing core inflation in its State of the Economy report earlier this month as evidence of a general decline in prices.

In FY24, the RBI sees a 6.5% increase in GDP.

S&P Global Market Intelligence, the company's research and analysis arm, increased India's growth prediction to 6.6% for FY24 this month, despite predicting greater inflation. The Organization for Economic Co-operation and Development likewise projects higher price increases (to 6.3% from 6.1% previously). However, the Asian Development Bank has reduced its growth projection for India from 6.4% to 6.3%.

A Brighter Future, Despite Fears

The ratings agency predicted 6.9% and 6.9% growth for India in FY25 and FY26 respectively, and 7.0% growth in FY27. "Overall, since the fourth quarter of 2019 (before Covid-19), growth in India and China has been 19.6% and 16.9%, respectively," S&P said.

Concerning inflation, it revised its estimate for India down to 4.4% for 2019 from 4.5%. By FY26, the policy rate is projected to have dropped to 5.25 percent.

https://economictimes.indiatimes.com/epaper/delhicapital/2023/sep/26/et-corp/sp-retains-india-growth-outlook-for-fy24-at-6/articleshow/103942162.cms