Fitch raises India’s GDP forecast to 6.3% from 6%
The Indian economy is set to grow by 6.3% for the current fiscal year, up from 6% predicted earlier in the year, according to a leading credit ratings agency.
Robust growth in the first quarter and strong short-term momentum prompted Fitch Ratings to raise its forecast for growth. It said: “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.
India’s central bank, the Reserve Bank of India (RBI), is predicting the economy will grow 6.5% in FY24. Fitch said India will be affected by sluggish global trade, while the full impact of the RBI raising interest rates 250 basis points (bps) is still to be felt.
However, it said the government’s drive to increase capital expenditure, moderate commodity prices and the growth in credit 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.
Government figures show that India's retail inflation eased to 4.25% in May, from 4.7% in April, putting it within the RBI’s inflation target of 2%-6% for the third consecutive 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 said.
Meanwhile, S&P Global Ratings has said that India will remain the fastest growing economy among Asia Pacific nations. Like the RBS, it is predicting growth of 6%.
India is likely to grow at 6.7% for the next three years, retaining its position as the fastest-growing major economy, said S&P Global Ratings in its latest report.
The report stated that Asia’s emerging economies will remain the fastest-growing ones and India, along with Vietnam and Philippines, will lead in growth outlook through 2026.
They will see average growth of 6.7%, 6.6%, and 6.1% respectively in the period 2023-2026, it said.
“In India, we forecast growth of 6% in fiscal 2024 as reopening momentum gradually fades and tighter monetary policy restrains activity. Private consumer demand is slowing against this backdrop, with urban consumers faring better than rural," said S&P Global Ratings.
“Agriculture and construction activity has shown resilient growth, though agriculture performance in the coming fiscal year will be affected by El Nino conditions. Beyond this fiscal year, we expect growth close to 7% on strong investment and domestic consumer demand,” it added.
India drops three places in world competitiveness ranking
India slipped three spots to 40th position in the latest world competitiveness ranking published by the International Institute for Management Development (IMD). The annual report, published by by IMD’s World Competitiveness Centre (WCC), shows that India is still in a better position compared with the 2019-2021 period when it was ranked 43rd.
Denmark, Ireland and Switzerland claimed the top three spots; Singapore was fourth, while the Netherlands secured the fifth spot. Taiwan, Hong Kong, Sweden, the USA and the UAE made up the rest of the top 10.
The IMD report said that India seen improvements in government efficiency but slightly underperformed in business efficiency, infrastructure and economic performance when compared with other countries.
Exchange rate stability, compensation levels and advancements in pollution control were the top three contributing factors that boosted India’s score.
The report highlighed the challenges faced by India in 2023, which include sustaining high GDP growth, managing financial market volatility, controlling inflation and fiscal deficit, accelerating digital transformation and mobilizing resources for infrastructure development.
Despite the drop in the league table, India’s positioning in the World Competitiveness Ranking is considered valuable for evaluating contrasting business environments, aiding international investment decision, and assessing the impact of public policies. The report also serves as an indicator of the quality of life in each country.
The IMD World Competitiveness Yearbook, first published in 1989, analyses and benchmarks the competitiveness of 64 countries worldwide using a combination of surveys, statistical data, and trends. It evaluates how countries manage their competencies to achieve long-term value creation.
