Fitch raises India FY24 GDP forecast to 6.3% on strong growth momentum
4:11 am Thursday, June 22nd, 2023
MUMBAI (Reuters) – Fitch Ratings raised its growth forecast for the Indian economy to 6.3% for the current fiscal year, from 6% earlier, on the back of robust growth in the first quarter and strong near-term momentum, it said on Thursday.
“The economy also continues to benefit from high bank credit growth and infrastructure spending with more to come from the latter,” it said in a statement, making India one of the fastest-growing economies in the world.
The Reserve Bank of India projects the economy will grow 6.5% in FY24.
Fitch said India will be affected to an extent by slowing global trade, while the full impact of the Reserve Bank of India’s (RBI) 250 basis points (bps) of monetary tightening is still to be felt.
However, it said the government’s push to increase capital expenditure, moderate commodity prices and robust credit growth are expected to support investment.
“Slowing inflation should also start to help consumers over time and households have now turned more optimistic about future earnings and employment,” the ratings agency said.
Fitch said although inflation has eased in recent months, the monsoon outlook and the potential impact of El Nino posed a risk in the second half of the year.
India’s retail inflation eased to 4.25% in May from 4.7% in April, firmly within the RBI’s inflation band of 2%-6% for the third straight month.
“With growth expected to moderate further, and inflationary pressures easing, we expect the RBI to pause its rate cycle for the time being before cutting early next year – a change from our previous call of one more 25 bps increase to 6.75%,” Fitch wrote.
(Reporting by Swati Bhat; Editing by Savio D’Souza)
