S&P Global raises its forecast for India's FY24 GDP growth to 6.4 Percent

S&P Global raises its forecast for India's FY24 GDP growth to 6.4 Percent
S&P Global Ratings has revised its projection for India's Gross Domestic Product (GDP) growth in the financial year 2024 (April 2023 - March 2024) from 6% to 6.4%. This positive revision has been attributed to the strong domestic momentum which has helped to counterbalance the negative effects of high food inflation and weak exports.
The country's GDP growth projection for the financial year 2025 (April 2024 - March 2025) has been reduced to 6.4% from the earlier projection of 6.9%. This is due to an expected slowdown in growth during the second half, caused by subdued global growth, a higher base, and the lagged impact of interest rate hikes from the Reserve Bank of India.
The rating agency also believes that it will take some time for India's interest rate cycle to turn as the headline inflation remains above the RBI's target of 4%. "In India, there was a transitory spike in food inflation in the July-September quarter, but it appears to have had little effect on the underlying inflation dynamics", the note said.
S&P Global has predicted that the interest rates in India will decrease by 100 basis points by March 2024. As for the US, they expect a gradual decline in inflation towards the target rate of 2% set by the Federal Reserve. However, S&P Global anticipates another rate hike in the December meeting and the first rate cut will happen only by mid-2024.
"In all, the strain from higher US interest rates on Asia-Pacific markets and currencies will likely persist into 2024", the note said. A more resilient US economy would call for rates to be even higher for longer. S&P Global also expects China to grow in line with its potential in 2024. "After finding a trough in July, growth momentum has improved since August", the note said.
The agency further said that fiscal and monetary easing measures have started to add up, particularly in real estate. For the world's second-largest economy, S&P Global has raised its 2023 forecast to 5.4%. "Still, with the property sector struggling and confidence subdued, the growth outlook remains moderate", it said.