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Informist, Friday, Dec. 6, 2024

 

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--Fitch: Domestic demand to be main driver of India GDP growth in FY26, FY27 
--Fitch: Rise in inflation in India to unwind in coming months 
--Fitch: Expect headline inflation to fall to RBI's 4% target by end-2025 
--Fitch: Don't see RBI cutting rates until early 2025 as inflation high 
--Fitch: See moderate easing in rates by RBI with 25 bps cuts in 2025, 2026 
--Fitch:India Jul-Sept soft patch unlikely to lead to prolonged growth slump 
--Fitch: Lowered FY25 India GDP growth forecast to 6.4% from 7.0% 
 

 

 

NEW DELHI – Fitch Ratings has lowered its India GDP growth forecast for 2024-25 (Apr-Mar) by 60 basis points to 6.4?ter growth slowed down sharply in Jul-Sept. GDP growth fell to a seven-quarter low of 5.4% in Jul-Sept.

 

Fitch's revision in forecast comes just ahead of the outcome of the Reserve Bank of India's Monetary Policy Committee meeting, where the committee is expected to leave repo rate unchanged at 6.50% but lower its FY25 GDP growth projection of 7.2%. 

 

The rating agency does not expect the MPC to cut the policy rate until early 2025, as "both inflation and inflation expectations remain high". "We expect a moderate easing in rates, with cuts of 25 bps in 2025 and 2026."

 

Even as Fitch has lowered its full year growth forecast, it does not think that the Jul-Sept "soft patch" will translate into a prolonged slump in economic activity, the rating agency said in its latest edition of the Global Economic Outlook. "Consumer and business confidence remain strong; a push for infrastructure expansion supports investment; capacity utilisation remains high; monthly trade data show a sharp pick-up in exports in October.

 

Domestic demand will be the main driver of GDP growth in the next two financial years, Fitch said. However, consumption growth will ease, while capital spending will increase faster, led by the private sector and underpinned by a continued strong pace of public capital spending, the rating agency said. "A risk to growth is whether employment and wage dynamics will continue to support consumer spending, which would also likely have implications for the private investment outlook."

 

On inflation, Fitch said that the recent rise in inflation will unwind in the coming months, "due to slightly above-average monsoon rains that should limit upward pressures on a range of food prices". CPI inflation was at a 14-month high of 6.21% in October and is seen at 5.6% in November as per an Informist poll. "We expect headline inflation to fall to the Reserve Bank of India (RBI)'s 4% target by end-2025, and remain close to that level in 2026." Fitch said.  End

 

Reported by Shubham Rana

Edited by Deepshikha Bhardwaj

 

 

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