MUMBAI (Reuters) – India is expected to grow by 7.2% in the current fiscal year, stronger than earlier expected, with its central bank opting for just a one-quarter-point rate cut in that period, Fitch Ratings said in its quarterly Global Economic Outlook (GEO) report published on Tuesday.
The ratings agency has also raised its world growth forecast for 2024 to 2.6% from 2.4% earlier as confidence in European recovery prospects improve, China’s export sector revives and domestic demand in emerging markets excluding China shows stronger momentum.
“We still expect the RBI to cut its policy rate this year, but only once, to 6.25%. In the March GEO we expected 50 basis points of cuts this year. We then expect 25 bps of cuts in both 2025 and 2026,” Fitch wrote.
India’s growth forecast marks an upward revision of 0.2 percentage points versus their March forecast.
“Investment will continue to rise but more slowly than in recent quarters, while consumer spending will recover with elevated consumer confidence,” Fitch said about India.
The agency, however, expects growth to slow in later years and approach their medium term trend estimate.
“We forecast real GDP growth of 6.5% in FY25/26 (unchanged from March), and 6.2% in FY26/27, driven by consumer spending and investment,” they wrote.
Fitch expects headline inflation in the South Asian nation to continue declining to 4.5% by calendar year-end, and average 4.3% in 2025 and 2026, staying slightly above the mid-point of the Reserve Bank of India’s 2% to 6% target range.
(Reporting by Swati Bhat; Editing by Nivedita Bhattacharjee)
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