S&P Global hikes India's FY24 GDP growth forecast by 40 bps to 6.4%

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S&P Global Ratings on Friday hiked India's gross domestic product (GDP) growth rate forecast for 2023-24 (FY24) to 6.4 per cent from 6 per cent earlier. However, for FY25, the GDP growth projection has been slashed by 50 basis points (bps) to 6.4 per cent.

In its "Economic Outlook Asia-Pacific Q1 2024: Emerging Markets Lead The Way", the agency on Monday said, "We have revised up our projection for India's GDP growth for fiscal 2024 (ending in March 2024) to 6.4 per cent, from 6 per cent, as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports."

It added, "Still, we expect growth to slow in the second half of the financial year amid subdued global growth, a higher base, and the lagged impact of rate hikes. As a result, we have lowered our outlook for growth in fiscal 2025 to 6.4 per cent from 6.9 per cent."

S&P Global added that the fixed investment in the country has recovered more than private consumer spending. However, the agency's projection is lower than the central bank's 6.5 per cent. 

For FY26, the agency has kept India's GDP growth projection unchanged at 6.9 per cent.

On inflation, S&P Global said that in FY24, India is expected to report inflation of 5.5 per cent, under the Reserve Bank of India (RBI)'s upper tolerance limit of 6 per cent. In FY25, it is expected to be lower at 4.5 per cent.

India's retail inflation touched a high of 7.4 per cent in July, mainly due to high food prices. Since then, it has cooled down. In October, it was recorded at 4.9 per cent. In the latest monetary policy announcement, RBI Governor Shaktikanta Das said that India's retail inflation is expected to be 5.4 per cent for FY24, with Q2 at 6.4 per cent, Q3 at 5.6 per cent, and Q4 at 5.2 per cent.

S&P Global on Monday said, "In India, there was a transitory spike in food inflation in the July-September quarter, but it appears to have had little effect on underlying inflation dynamics. Still, headline inflation remains above the RBI's target of 4 per cent, suggesting it will be a while before the rate cycle turns."

The projections in the report suggest that the repo rate is expected to be unchanged at 6.5 per cent at the end of FY24.  At the end of FY25, the repo rate, according to S&P Global, is expected to be 5.5 per cent and 5.25 per cent at the end of FY26.

The report further added that the Asia-Pacific region is expected to report healthy growth this year.

"Overall, growth this year and next is on track to be the strongest in emerging market economies with solid domestic demand: India, Indonesia, Malaysia, and the Philippines," it said.