S&P Adjusts India's FY25 Growth Forecast Downward After Upgrading FY24 Outlook To 6.4%

Revising its earlier projection, S&P Global Ratings now anticipates India's Gross Domestic Product (GDP) to grow by 6.4 per cent in FY24, an upward adjustment from the previous estimate of 6 per cent. This adjustment is attributed to the resilience of domestic momentum, which has effectively mitigated the impact of challenges arising from high food inflation and weak exports.

The projection marginally deviates from the government and RBI's 6.5 percent expectation but aligns with benchmarks set by various other agencies.

However, the rating firm has reduced its GDP growth projection for India in the FY25 to 6.4 per cent, marking a decline from the earlier forecast of 6.9 per cent. The adjustment is based on the expectation of a slowdown in the latter half of the year, influenced by factors such as muted global economic growth, an elevated baseline, and the delayed impact of interest rate hikes implemented by the Reserve Bank of India.

S&P Global Ratings believes India's interest rate cycle will take time to shift, citing persistent headline inflation above the RBI's 4 per cent target. Despite a temporary spike in food inflation in the July-September quarter, the agency notes minimal impact on the underlying inflation dynamics.

In October, the Monetary Policy Committee expected near-term inflation to improve, owing to corrections in vegetable prices coupled with lower LPG costs. Nevertheless, the future trajectory depends on several factors, including climatic conditions, global energy and food price fluctuations.

On the Asia-Pacific front, S&P Global foresees strong overall growth, particularly in emerging market economies driven by solid domestic demand. Countries such as India, Indonesia, Malaysia, and the Philippines are expected to lead this growth, as highlighted in S&P Global Ratings' report titled 'Economic Outlook Asia-Pacific Q1 2024: Emerging Markets Lead The Way.'

As for China, the ongoing property challenges are dampening global economic prospects, with the report projecting GDP growth at 5.4 per cent in 2023 and 4.6 per cent in 2024.