Fitch Ratings upgrades India's FY25 GDP growth forecast from 7% to 7.2%

Fitch Ratings has revised India's FY25 GDP growth forecast to 7.2%, up from 7%. The upward revision is attributed to recovery in consumer spending and increasing investment trends.

Fitch projects a growth rate of 6.5% and 6.2% for FY26 and FY27, respectively. Despite high food price inflation, the overall economic outlook for India remains strong and promising.

In a significant development, Fitch Ratings, a globally recognized rating agency, has revised India's GDP growth forecast for the fiscal year 2025 (FY25) to 7.2 percent, up from the previous estimate of 7 percent.

This announcement, made on June 18, 2024, is a testament to the robustness of the Indian economy and its resilience in the face of global economic challenges. The upward revision in the growth forecast is primarily attributed to the recovery in consumer spending and increasing investment trends.

Consumer confidence, a key driver of economic growth, has been on the rise, leading to a surge in consumer spending. This, coupled with increased investment, has contributed to the positive economic outlook. Fitch's global outlook report stated, We expect the Indian economy to grow by a strong 7.2 percent in FY25. This projection is in line with the Reserve Bank of India's (RBI) growth estimates, further reinforcing the positive economic sentiment.

The rating agency's report also provided insights into the performance of the Indian economy in the subsequent years. It projected a growth rate of 6.5 percent and 6.2 percent for FY26 and FY27, respectively. While the growth rate is expected to slow down compared to FY25, it still represents a healthy growth trajectory.

Investments, a critical component of GDP, are expected to continue rising, albeit at a slower pace compared to recent quarters. The report stated, Investments will continue to rise but it will be slow in comparison to recent quarters while consumer spending will recover with elevated consumer confidence.

In terms of inflation, Fitch Ratings expects the retail inflation rate in India to decrease to 4.5 percent by the end of the current year. The agency further estimates the inflation rate to be 4.3 percent in 2025 and 2026. This decrease in inflation is expected to provide relief to consumers and boost spending, thereby contributing to economic growth.

This positive economic outlook for India is not an isolated event. Earlier, the World Bank also raised India's GDP growth forecast to 6.6 percent from 6.4 percent, indicating a global consensus on the strong performance of the Indian economy.

The Indian economy had previously demonstrated impressive growth, expanding at a rate of 8.2 percent in FY24, driven by a stronger-than-expected expansion of 7.8 percent in the fourth quarter. This robust growth, coupled with the recent upward revision of the GDP growth forecast by Fitch Ratings, underscores the strength and resilience of the Indian economy.

However, Fitch Ratings also highlighted the persistent high food price inflation in India. Despite this, the agency expects headline inflation to continue declining, staying slightly above the mid-point of its target range.

The upward revision of India's GDP growth forecast for FY25 by Fitch Ratings is a positive development that signals a strong and resilient economy. The recovery in consumer spending and increasing investment trends are the main drivers of this positive outlook. Despite the challenges posed by high food price inflation, the overall economic outlook for India remains strong and promising. This development is a positive sign for investors, businesses, and consumers alike, indicating a strong and stable economic environment. As the Indian economy continues to grow and evolve, it will be interesting to see how it navigates the challenges and opportunities that lie ahead.