Fitch Ratings has raised India’s growth forecast for FY25 to 7%, up from the previous estimate of 6.5%. The upgrade is attributed to robust domestic demand and sustained growth in business and consumer confidence, following a strong 8.4% expansion in Q3FY24.
Reasons for Forecast Upgrade
- Strong Domestic Demand: Fitch predicts domestic demand, particularly investments, to be the main driver of growth.
- High Confidence Levels: Confidence among businesses and consumers remains high, further supporting growth.
- Short-Term Growth Outlook: Growth is expected to be higher than normal in the short term but may moderate towards a more sustainable pace in FY25.
Inflation Expectations
- Gradual Decrease: Fitch expects inflation to gradually decrease to 4% by the end of the year, assuming stabilization in food prices.
Monetary Policy Forecast
- Revised Interest Rate Cut Estimate: Fitch now anticipates the Reserve Bank of India to cut interest rates by 0.5% in the second half of the year, down from the previous estimate of 0.75%. This adjustment reflects the stronger growth outlook.
- RBI’s Stance: The RBI has maintained the repo rate at 6.50% for six consecutive meetings and remains committed to achieving a sustainable 4% inflation target.
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