India economic growth Brightens: Fitch Raises Growth Forecast to 7.2%

Robust Growth Projections for India

Fitch Ratings has revised its growth forecast for the Indian economy, raising it from 7% to 7.2%. This adjustment reflects a notable recovery in consumer spending and a continued rise in investment, albeit at a slower pace than seen in recent quarters.

Key Factors Driving Growth

According to Fitch’s latest global economic outlook report, several factors contribute to this optimistic forecast:

1. Consumer Confidence: Elevated consumer confidence is expected to boost spending, aiding overall economic growth.

2. Investment Trends: While investment is projected to increase, the pace will be more moderate compared to recent quarters.

3. Purchasing Managers Survey: Data from these surveys indicate sustained growth at the start of the current financial year.

Future Projections

Fitch has outlined the growth trajectory for the next few years:

• Fiscal Year 2025-26: Projected growth rate of 6.5%

• Fiscal Year 2026-27: Projected growth rate of 6.2%

Monsoon and Inflation

The report highlights the importance of a normal monsoon season in supporting growth and stabilizing inflation. However, Fitch expressed concerns about potential risks from the recent heatwave.

RBI’s Role

Fitch anticipates that the Reserve Bank of India (RBI) will cut policy interest rates by 25 basis points this year, bringing the rate down to 6.25%. This move is expected to further support economic growth.

Alignment with RBI Projections

Fitch’s revised growth forecast aligns closely with the RBI’s estimates. The Reserve Bank of India projects a GDP growth rate of 7.2% for the fiscal year 2024-25, with quarterly projections as follows:

• Q1 2024-25: 7.3%

• Q2 2024-25: 7.2%

• Q3 2024-25: 7.3%

• Q4 2024-25: 7.2%

Past Performance

The Indian economy demonstrated robust growth in the previous fiscal year (2023-24), achieving an overall growth rate of 8.2%, with a 7.8% expansion in the March quarter alone.

Global Economic Context

Fitch has also updated its global growth forecasts:

• World Growth in 2024: Raised from 2.4% to 2.6%

• China’s Growth in 2024: Increased from 4.5% to 4.8%

Future Global Trends

For 2025, Fitch forecasts a slight decline in world growth to 2.4%, influenced by:

• US Growth: Expected to slow to a below-trend rate of 1.5%

• Eurozone Growth: Predicted to pick up to 1.5%

• China’s Growth: Expected to decrease to 4.5% as exports and government spending slow down.

In Conclusion, Fitch Ratings’ upward revision of India’s growth forecast to 7.2% underscores the country’s robust economic prospects. With strong consumer confidence, ongoing investment, and supportive monetary policy, India is well-positioned for continued growth. However, potential risks such as climatic conditions and global economic trends must be carefully monitored. This optimistic outlook, aligned with RBI’s projections, reinforces India’s significant role in the global economic landscape.