Fitch raises India's FY25 economic growth forecast to 7.2%
What's the story
Fitch Ratings has revised its economic growth forecast for India in FY25 to 7.2%, up from the previous projection of 7% made in March.
The global credit rating agency attributes this upward revision to a recovery in consumer spending and an increase in investment.
Fitch stated in its global economic outlook report that it expects the Indian economy to expand by a strong 7.2% in FY24/25.
Similar projections
Fitch's forecast aligns with RBI's economic growth projection
The revised economic growth forecast by Fitch Ratings aligns with the projection made by the Reserve Bank of India (RBI).
Earlier this month, RBI also projected a 7.2% expansion of the Indian economy in the current fiscal year, based on improving rural demand and moderating inflation.
Fitch further predicted growth rates of 6.5% and 6.2% for fiscal years 2025-26 and 2026-27, respectively.
Growth drivers
Consumer confidence and investment to drive economic growth
Fitch Ratings expects investment to continue rising, albeit at a slower pace than recent quarters.
The agency also anticipates a recovery in consumer spending due to elevated consumer confidence.
According to Fitch, purchasing managers' survey data indicates continued growth at the start of the current financial year.
The agency also highlighted that signs of an approaching normal monsoon season should support growth and stabilize inflation.
Monetary policy
Fitch anticipates RBI will cut policy interest rates
Fitch Ratings expects inflation to decline to 4.5% by the end of 2024 and average 4.3% in 2025 and 2026.
In terms of monetary policy, the agency anticipates that the RBI will cut policy interest rates by 25 basis points this year, bringing them down to 6.25%.
This projection is based on the agency's analysis of current economic conditions and trends.