India's GDP To Grow 6-7 Per Cent During 2024-26, Growth Prospects Strong: S&P

S&P said interest rates in India are unlikely to rise materially, and this should limit the risk for the banking industry

S&P Global Ratings on Thursday said India's GDP could expand 6-7.1 per cent annually in fiscal years 2024-2026 as the nation's economic growth prospects remain strong over the medium term. In a report titled 'Global Banks Country-By-Country Outlook 2024', the rating agency said Indian banking sector's weak loans will decline to 3-3.5 per cent of gross advances by March 31, 2025, on the back of structural improvement, including healthy corporate balance sheets, tighter underwriting standards, and improved risk-management practices.

S&P said interest rates in India are unlikely to rise materially, and this should limit the risk for the banking industry. "Unsecured personal loans have grown rapidly and could contribute to incremental NPLs. We believe underwriting standards for retail loans generally remain healthy and overall level of delinquencies remains within acceptable limits for this product category," S&P Primary Credit Analyst Deepali Seth Chhabria said.

According to the report, global uncertainties will have a lesser impact on the Indian economy. Slower global growth and external demand will weigh on economic activity and could fuel further inflation. However, given that India is domestically oriented, the agency expects the economic growth to be less affected, it added.

"Economic growth momentum to continue. India's economic growth prospects should remain strong over the medium term, with GDP expanding 6-7.1 per cent annually in fiscal years 2024-2026," S&P said.

India's real GDP rose 7.8 per cent year-on-year (YoY) in the June quarter, up from 6.1 per cent in the March quarter.

The Reserve Bank of India (RBI) has forecast a 6.5 per cent economic growth for the 2023-24 and 2024-25 fiscal years. It also stated that State Bank of India and the leading private-sector banks have largely addressed their asset-quality challenges.

Many public-sector banks still carry relatively high volumes of weak assets, which will result in higher credit losses and hit profitability; their performance lags that of the industry.