S&P Global Ratings on Monday cut down the growth estimates for Indian economy in the next two fiscal years. This downgrade was attributed to elevated interest rates and lower fiscal impulse weighing down urban demand.
Issuing an update to its economic growth projections for Asia-Pacific economies post US elections, the ratings agency estimated the Indian economy to clock a GDP growth rate of 6.7 per cent in the 2025-26 fiscal year (FY26) and 6.8 per cent in the following 2026-27 fiscal year (FY27), reported PTI. The agency provided these estimates in its latest report titled, ‘Economic Outlook Asia-Pacific Q1 2025: US Trade Shift Blurs The Horizon’.
Notably, the previous growth projections for FY26 and FY27 stood at 6.9 per cent and 7 per cent respectively. Explaining the estimates, the agency said, “In India we see GDP growth easing to 6.8 per cent this fiscal year as high interest rates and a lower fiscal impulse temper urban demand. While purchasing manager indices (PMIs) remain convincingly in the expansion zone, other high-frequency indicators indicate some transitory softening of growth momentum due to the hit to the construction sector in the September quarter.”
Meanwhile, the ratings agency maintained its growth forecast for China at 4.8 per cent in 2024, but reduced next year’s projections to 4.1 per cent and that of 2026 to 3.8 per cent. Earlier, it provided a growth estimate of 4.3 per cent for next year and 4.5 per cent for FY27.
The agency explained that the change in the US administration will pose challenges for China and the rest of the Asia-Pacific region. There is more possibility of an increase in US tariffs and changes at the macro level could result in different expectations for interest rates.
Louis Kujis, S&P Global Ratings Asia-Pacific Chief Economist, said, “Rising risks are blurring the economic outlook for Asia-Pacific in the first quarter of 2025.While much of the region should be able to continue to grow solidly, central banks will probably remain cautious by not reducing their policy rates too fast.”