S&P Global raises India's FY25 GDP growth forecast by 40 bps to 6.8%

Agency's projection is lower than the Reserve Bank of India's and the government's growth estimate of 7%

S&P Global on Tuesday raised India's gross domestic product (GDP) growth forecast for Financial Year 2024-25 (FY25) by 40 basis points to 6.8 per cent or lower than the central bank and government’s projection of 7 per cent.

It expects India to grow at 7.6 per cent in FY24, making the projection in a report called "Economic Outlook Asia-Pacific Q2 2024: APAC Bides Its Time On Monetary Policy Easing". The New York-based agency retained India's GDP growth prediction for FY26 and FY27 at 7 per cent.

"For Asian emerging market (EM) economies, we generally project robust growth, with India, Indonesia, the Philippines, and Vietnam in the lead," said Louis Kuijs, Asia-Pacific chief economist at S&P Global Ratings.

S&P said that in domestic demand-led economies such as India, Japan, and Australia, the impact of high interest rates and inflation on household spending had reduced sequential GDP growth in the second half of FY24.

However, it said India is likely to see rate cuts of up to 75 basis points in India in calendar year 2024.

"In India, slowing inflation, a smaller fiscal deficit and lower US policy rates will lay the ground for the Reserve Bank of India to start cutting rates. But we believe more clarity on the path of disinflation could push this decision at least to June 2024, if not later," it said.

"In line with our projection for US policy rates, we largely expect these moves to occur in the second half of the year."

China’s GDP growth is likely to slow down to 4.6 per cent in FY25 from 5.2 per cent in FY24. "Our forecast factors in continued property weakness and modest macro policy support. Deflation remains a risk if consumption stays weak and the government responds by further stimulating manufacturing investment," said S&P.

About developed economies in the Asia-Pacific, S&P Global said it expects growth to pick up in trade-dependent ones such as South Korea, Taiwan, and Singapore, and fall in relatively domestic demand-led ones such as Japan and Australia.