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NEW DELHI: Global ratings agency S&P estimates India’s GDP growth to moderate to 6.8% in 2024-25 after a better than expected 7.6% growth in 2023-24.
This is a 40 basis points upgrade from its earlier forecast but is below 7% growth projected by RBI and govt. Several agencies have raised their growth forecast for India after a better-than-expected quarterly GDP growth of 8.4% in the December quarter.
“Even as we expect a mild slowdown in Asian EM economies, we generally see solid domestic demand growth and a pick-up in exports to drive robust growth, with India, Indonesia, the Philippines and Vietnam in lead,” said the report titled Economic Outlook Asia-Pacific Q2 2024: APAC Bides Its Time On Monetary Policy Easing.
Restrictive interest rates are likely to weigh on demand in next financial year, while regulatory actions to tame unsecured lending will affect credit growth. A lower fiscal deficit will also dampen growth. It expects RBI to cut rates by June this year.
“We forecast rate cuts of up to 75 bps (India, Indonesia, New Zealand, and the Philippines) this year (which for India is the fiscal year), with the median reduction of 50 bps. In line with our projection for US policy rates, we largely expect these moves to occur in the second half of the year,” the report said.
“In India, slowing inflation, a smaller fiscal deficit and lower US policy rates will lay the ground for RBI 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,” the report added.
The agency expects consumer inflation to decline further to 4.5% on average in fiscal 2025 and does not see the global shipping issues impacting overall inflation.
This is a 40 basis points upgrade from its earlier forecast but is below 7% growth projected by RBI and govt. Several agencies have raised their growth forecast for India after a better-than-expected quarterly GDP growth of 8.4% in the December quarter.
“Even as we expect a mild slowdown in Asian EM economies, we generally see solid domestic demand growth and a pick-up in exports to drive robust growth, with India, Indonesia, the Philippines and Vietnam in lead,” said the report titled Economic Outlook Asia-Pacific Q2 2024: APAC Bides Its Time On Monetary Policy Easing.
Restrictive interest rates are likely to weigh on demand in next financial year, while regulatory actions to tame unsecured lending will affect credit growth. A lower fiscal deficit will also dampen growth. It expects RBI to cut rates by June this year.
“We forecast rate cuts of up to 75 bps (India, Indonesia, New Zealand, and the Philippines) this year (which for India is the fiscal year), with the median reduction of 50 bps. In line with our projection for US policy rates, we largely expect these moves to occur in the second half of the year,” the report said.
“In India, slowing inflation, a smaller fiscal deficit and lower US policy rates will lay the ground for RBI 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,” the report added.
The agency expects consumer inflation to decline further to 4.5% on average in fiscal 2025 and does not see the global shipping issues impacting overall inflation.
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