S&P Global Ratings Report: India’s FY24 GDP Growth Rate Remains Robust

S&P Global Ratings has raised its forecast for India’s Gross Domestic Product (GDP) growth during the current financial year FY24 to 6.4% from 6% earlier.

The rating agency stated that it revised upward projections for this fiscal year as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports.

On the other hand, it has lowered its outlook for growth in the forthcoming financial year (2024-25) to 6.4% from 6.9% earlier. This is after taking into account a higher base impact and subdued global growth.

While S&P Global’s higher projection for FY24 is in line with other agencies, it is lower than the government and Reserve Bank of India (RBI) projection, which stands at 6.5%.

The IMF, World Bank, ADB and Fitch anticipate India’s GDP to expand by 6.3% in FY24. The Indian economy witnessed an uptick of 7.2% in the financial year 2022-23  and 7.8% in the April-June quarter.

The second quarter GDP data may be released later this week. Economists anticipate that the GDP growth is likely to witness a downward trend in the July-Sept quarter, taking into account the erratic rain pattern experienced this year.

On inflation, S&P stated that the uptick during the second quarter is unlikely to have an influence on overall inflation. However, headline inflation remains over the RBI’s target of 4%, highlighting it will be a while before the rate cycle turns, as per S&P.

In the case of India, S&P Global anticipates interest rates will experience a dip by 100 Basis Points (bps) by March 2024.

Furthermore, S&P Global predicts India’s GDP will reach 7% by 2026, outpacing China’s expected growth of 4.6% during the same period. As per the rating agency, the deepening property sector issues and high debt levels weakened the growth momentum of the second-largest global economy.