‘Expect Indian Economy to expand by a strong 7.2%’: Fitch raises growth forecast from 7%

NEW DELHI : Fitch Ratings raised India’s growth forecast on Tuesday, citing recovery in consumer spending and increased investment. The agency has increased India’s growth forecast from 7 per cent projected in March to 7.2 per cent. 

It has projected a growth rate of 6.5 for fiscal year 2025-26 and 6.2 per cent for 2026-27. In its global economic outlook report, Fitch said, “We expect the Indian economy to expand by a strong 7.2 per cent in FY24/25 (an upward revision of 0.2 pp from the March GEO).”

It predicted investment to continue to rise but more slowly than in recent quarters. Consumer spending, it said, will recover with elevated consumer confidence. Purchasing managers survey data point to continued growth at the start of the current financial year, it said. 

The coming monsoon season being normal should support growth and make inflation less volatile, it added. Fitch, however, voiced concerns about the recent heatwave that could pose a risk. It also expects RBI to cut policy interest rates by 25 basis points this year to 6.25 per cent. 

“We expect growth in later years to slow and approach our medium-term trend estimate,” it said, adding that consumer spending and investment would drive growth. 

Fitch’s projection is in line with the Reserve Bank of India’s estimated GDP growth for 2024-25 at 7.2 per cent. RBI Governor Shaktikanta Das projected real GDP for 2024-25 Q1 at  7.3 per cent, Q2 at 7.2 per cent, Q3 at 7.3 per cent, and Q4 at 7.2 per cent. 

The Indian economy grew at 8.2 per cent in the last fiscal 2023-24, with an expansion of 7.8 per cent in March quarter. 

Fitch also raised its forecast for world growth in 2024 to 2.6 per cent from 2.4 per cent, as mentioned in the March 2024 Global Economic Outlook. China’s growth outlook has also been raised to 4.8 per cent from 4.5 per cent. 

“However, for 2025, we forecast world growth to edge down to 2.4 per cent as US growth slows to a below-trend rate of 1.5 per cent and growth in the eurozone picks up to 1.5 per cent. We also expect growth in China to fall to 4.5 per cent next year as exports and government spending decelerate,” it said.