S&P Revises Economic Outlook, Says India To Grow At 6.8 Per Cent In FY25

In its Economic Outlook for the Asia Pacific, the rating agency said that the outlook for the Asian emerging market (EM) remained robust, with strong growth expected

S&P noted that tight interest rates are expected to dampen demand in the upcoming fiscal year, while regulatory actions to limit unsecured lending would impact credit growth.

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S&P Global Ratings said on Tuesday made an upward revision in its growth forecast for the Indian economy. The ratings agency said that the growth outlook for the economy for the upcoming 2024-25 fiscal year (FY25) stood at 6.8 per cent, however, it noted that interest rates could obstruct economic growth. 

The rating firm said that the economy is projected to have logged a growth rate of 7.6 per cent in the current fiscal year, reported PTI. Last year in November, the agency gave a projection of 6.4 per cent growth rate for FY25 based on strong domestic momentum. 

In its Economic Outlook for the Asia Pacific, the rating agency said that the outlook for the Asian emerging market (EM) remained robust, with strong growth expected in India, Indonesia, the Philippines, and Vietnam.

“In largely domestic demand-led economies such as India, Japan, and Australia, the impact of higher interest rates and inflation on household spending power reduced sequential GDP growth in the second half,” the agency said. 

S&P noted that tight interest rates are expected to dampen demand in the upcoming fiscal year, while regulatory actions to limit unsecured lending would impact credit growth. It added that it projected a rate cut of up to 75 basis points in India in the current fiscal.

“High real policy rates will choke demand and are therefore likely to strengthen the case for lowering rates. In line with our projection for US policy rates, we largely expect these moves to occur in the second half of the year. In India, slowing inflation, a smaller fiscal deficit and lower US policy rates will lay the ground for the Reserve Bank of India to start cutting rates. But we believe more clarity on the path of disinflation could push this decision at least to June 2024, if not later,” S&P said.