India's average growth rate likely to be 6.7% till FY27, says S&P

Indian economy is expected to clock an average growth rate of 6.7 per cent till 2026-27 fiscal driven by domestic consumption, S&P Global Ratings Senior Economist (Asia Pacific) Vishrut Rana said on Wednesday.

He said the economic growth in the current fiscal is expected to come in around 6 per cent, lower than 7.2 per cent clocked in 2022-23.

"We are seeing some headwinds from the trade side which is affecting activity and that is one of the factors that is affecting growth this year," Rana said at a webinar.

The factors that are driving the slowdown from 7.2 per cent growth last fiscal are weaker external environment, moderation in pent-up demand, and softening private consumption activity, Rana said, adding, with tighter monetary policy there is expected to be some impact on consumer demand.

"We expect 6.7 per cent growth on average over the course of our forecast horizon which extends to FY26-27. This fiscal (2023-24) we expect growth to be 6 per cent," Rana said, adding that consumer activity would be the lead driver of growth.

Reserve Bank of India has projected GDP growth in the current fiscal to be 6.5 per cent.

Further, Rana said there is a "strong tailwind" coming from the investment side and the investment outlook is looking significantly stronger.

"Inflation is moderating... We do not expect RBI to be in a hurry to cut interest rates," Rana said, adding, the RBI is likely to wait till early 2024 to cut rates till inflation expectations are anchored fully.

Retail inflation has declined to an over 2-year low of 4.25 per cent in May. The RBI has been mandated to keep inflation at 4 per cent with a band of (+/-) 2 per cent.

Earlier this week, S&P had said that at 6 per cent economic growth, India will be the fastest-growing economy among Asia Pacific nations.