Ratings agency Fitch has revised its GDP forecast for India, predicting a growth rate of 6.3% for the financial year 2023-24 (FY24). This upward revision from the previous projection of 6% comes as a result of the country’s near-term momentum and a robust performance in the first quarter. Fitch highlights the broad-based strength of India’s economy, citing various positive indicators such as a 6.1% year-on-year GDP growth in the first quarter, resilient auto sales, PMI surveys, and credit growth in recent months.
Improved Outlook Following Strong Q1 Performance:
The rating agency acknowledges India’s impressive economic performance in the first quarter, which exceeded expectations. Fitch notes the recovery in the manufacturing sector after two consecutive quarterly contractions, a significant boost from the construction industry, and an increase in farm output. These factors contributed to the growth of GDP in the January-March period.
Domestic Demand and Net Trade as Growth Drivers:
Fitch highlights that the GDP growth in expenditure terms was primarily driven by robust domestic demand and a favorable contribution from net trade. Despite challenges posed by the pandemic and the global economic environment, India’s domestic demand remained resilient, supported by various factors such as increased government spending, improved consumer sentiment, and a revival in business activities.
Reassessment of India’s Economic Prospects:
In March, Fitch had revised down its growth forecast for India to 6% from 6.2% due to concerns related to high inflation, interest rates, and weak global demand. However, since then, the country has witnessed a moderation in inflation and a notable pick-up in its domestic economy. These positive developments prompted Fitch to reassess India’s economic prospects and revise its forecast upwards.
Comparative Analysis and Previous Growth Figures:
The projected GDP growth rate of 6.3% for FY24 represents a decline from the 7.2% expansion witnessed in the previous financial year (FY23). Nevertheless, it is important to note that FY23’s growth was achieved amidst the severe impact of the COVID-19 pandemic. The Indian economy had experienced a contraction of 7.3% in FY21, making the subsequent recovery in FY22 and FY23 commendable.