New Delhi : S&P Global Ratings on Monday maintained its forecast for India’s GDP growth at 6.8 per cent for the current fiscal year (2024-25) but revised down its projections for the next two years.
The rating agency now expects the country’s GDP to grow at 6.7 per cent in 2025-26 and 6.8 per cent in 2026-27, marking a reduction of 20 basis points from previous estimates. For 2027-28, India’s GDP is projected to expand at 7 per cent.
The rating agency cited high interest rates and a lower fiscal impulse as key factors contributing to a moderation in growth. While India’s Purchasing Manager Indices (PMIs) remain firmly in expansion territory, high-frequency indicators signal a temporary slowdown. This is especially evident in the construction sector, which took a hit during the September quarter.
Despite these concerns, the Reserve Bank of India (RBI) remains optimistic. The RBI, in its latest bulletin, stated that the economic slowdown observed in the second quarter of 2024-25 has already passed.
Private consumption, driven by robust festival spending, is expected to fuel demand in the months ahead. The RBI has pegged India’s GDP growth at 7.2 per cent for 2024-25, while the IMF and World Bank forecast 7.0 per cent.
Earlier this year, India’s Economic Survey projected a more conservative growth range of 6.5-7.0 per cent.
India’s economy grew by an impressive 8.2 per cent in the 2023-24 fiscal year, continuing to lead global growth. However, inflation remains a challenge, particularly food inflation, which has breached the RBI’s tolerance level.
As a result, S&P Global Ratings anticipates the RBI will only implement one rate cut during the current fiscal year, as it navigates the impact of supply shocks in agriculture driven by climate change and erratic rainfall patterns. Consumer inflation stood at 6.21 per cent in October, exceeding the RBI’s 6 per cent target, further complicating the central bank’s decision-making process.
