S&P Global Ratings on Tuesday announced that it is maintaining the GDP growth forecast for the Indian economy at 6.8 per cent. The ratings agency noted that there are possibilities of a rate cut from the Reserve Bank of India (RBI) in October.
Sharing its economic outlook for the Asia-Pacific region, S&P said that it is retaining its gross domestic product (GDP) growth predictions for the 2025-26 fiscal year (FY26) at 6.9 per cent. It added that robust economic growth in India would aid the central bank in keeping a tab on inflation, reported Business Standard.
“In India, GDP growth moderated in the June quarter as high interest rates tempered urban demand, in line with our projection of 6.8 per cent GDP for the full financial year 2024-25,” the agency said in its report. Notably, India recorded a growth rate of 8.2 per cent in the 2023-24 fiscal year (FY24).
The economic outlook focused on the Indian government’s emphasis on fiscal consolidation. Finance Minister Nirmala Sitharaman in her July Budget presentation paid special attention to fiscal consolidation and set aside Rs 11.11 trillion for capital expenditure. Further, the government also said it aims to reduce the fiscal deficit below 4.5 per cent of the GDP by FY26.
“Our outlook remains unchanged: we expect the RBI to begin cutting rates in October at the earliest and have pencilled in two rate cuts this financial year (ending March 2025),” S&P noted.
The agency noted that food inflation remains a serious problem. It said that unless the food prices in the country decline in a lasting and meaningful way, it will be difficult for the authorities to maintain the headline inflation rate at 4 per cent. S&P estimated that the inflation rate in the current fiscal year would remain at an average 4.5 per cent.