Fitch Ratings has revised India’s GDP growth forecast for FY25 to 7.2%, up from the previous estimate of 7%. This adjustment is attributed to expected recovery in consumer spending and continued investment, although at a slower pace than recent quarters. The economy had grown by 8.2% in FY24.
Investment and Consumer Spending
Fitch anticipates a continued rise in investment, albeit more slowly than in recent quarters, while consumer spending is expected to recover due to elevated consumer confidence. Purchasing managers’ surveys indicate ongoing growth at the start of the current financial year.
Global Economic Outlook
The publication also raised the global growth forecast for 2024 to 2.6% from 2.4%. European recovery prospects have improved, China’s export sector is reviving, and domestic demand in emerging markets (excluding China) shows stronger momentum.
Comparison with Other Forecasts
Fitch’s forecast aligns with the Reserve Bank of India’s (RBI) latest estimate of 7.2%. This is higher than projections by the IMF and ADB, both of which revised their forecasts to 7% in April, and S&P, which projects 6.8% growth.
Monsoon and Inflation
Signs of a normal monsoon season should support growth and stabilize inflation, though recent heatwaves pose a risk. Fitch expects growth to slow in later years, projecting 6.5% for FY25/26 and 6.2% for FY26/27.
RBI Policy and Global Trends
The RBI maintained its policy rate at 6.5% but is expected to cut it to 6.25% this year, with further reductions anticipated in 2025 and 2026. Globally, monetary policy easing is taking shape with expected rate cuts by the ECB, US Federal Reserve, and Bank of England, although persistent inflation suggests a slower decline in global rates over the next 12-18 months.