S&P Retains India FY25 GDP Growth Estimate at 6.8%

S&P Global Ratings has maintained its GDP growth forecast for India at 6.8% for FY25, citing high interest rates and reduced fiscal stimulus as factors tempering demand in non-agricultural sectors. The projection for FY26 and FY27 stands at 6.9% and 7%, respectively.

Economic Growth Context

S&P noted that India’s economic growth has consistently surpassed expectations, with GDP growth for fiscal 2024 revised upward to 8.2%. However, growth is expected to moderate to 6.8% in FY25 due to high interest rates and a diminished fiscal boost. In comparison, the Reserve Bank of India (RBI) has a more optimistic projection of 7.2% for FY25, up from an earlier estimate of 7%.

Inflation and Monetary Policy

The rating agency anticipates India’s retail inflation to be 4.5% for FY25, aligning with the RBI’s forecast. It also expects the RBI to reduce its policy rate from 6.5% to 6% in the current financial year, with further cuts to 5.5% in FY26 and 5.25% in FY27.

China’s Economic Forecast

S&P raised its GDP growth forecast for China to 4.8% for 2024 from an earlier estimate of 4.6%, but expects a sequential slowdown in the June quarter due to subdued consumption and strong manufacturing affecting prices and profit margins.

Moody’s Analytics Insights

Moody’s Analytics highlighted that India’s GDP is currently about 3.5% below the pre-pandemic trend, an improvement from 7% a year ago. The firm emphasized that India’s growth trajectory over the next five years will heavily depend on the BJP’s ability to forge alliances and address issues like inflation, unemployment, and socio-economic disparities. It noted that coalition partners might influence policy decisions, potentially slowing decision-making and diluting key policy initiatives of the BJP.