Fitch ratings elevates India’s FY25 growth forecast to 7.2%, Signaling economic boom

India's growth outlook for the next two fiscal years, FY26 and FY27, is kept at 6.5 percent and 6.2 percent, respectively, by Fitch Ratings, indicating continued economic expansion

Fitch Ratings has made a significant change to its estimate of India’s economic growth, raising its GDP growth estimate for the fiscal year 2025 (FY25) from 7 percent to 7.2 percent. This upbeat revision takes into account India’s strong economic recovery, which has been fueled by a boom in consumer spending and an advantageous investment environment.

Fitch Ratings

India’s growth estimate was raised to 7.2% from 7% in Fitch Ratings’ June Global Economic Outlook report, which was made public on Tuesday. This estimate is consistent with the 7.2% growth rate that the Reserve Bank of India (RBI) had projected for the current fiscal year.

The most recent projection from the global rating agency highlights India’s robust growth momentum in the face of a difficult global economic climate. Fitch credits this optimistic view to higher investments as well as elevated consumer confidence, which is anticipated to support spending. These elements are thought to be essential for advancing India’s economy since they have a major impact on both domestic demand and total economic activity.

Fitch Ratings
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It is anticipated that the growth trend would continue, as Fitch predicts a robust 7.2% expansion in FY25. India’s growth outlook for the next two fiscal years, FY26 and FY27, is kept at 6.5 percent and 6.2 percent, respectively, by Fitch, indicating continued economic expansion.

Fitch also emphasized that GDP growth has been greater in relation to gross value-added at basic prices due to declining indirect taxes, net of subsidies. According to Fitch’s projections, headline inflation in India is expected to drop to 4.5% by the end of 2024 and then average 4.3% in 2025 and 2026. The Reserve Bank of India wants to drive retail inflation down to about 4% of the target level. In spite of the RBI’s emphasis on reducing retail inflation, Fitch anticipates a single rate reduction this year, resulting in a 6.25 percent lending rate.

Right now, among emerging markets, India has one of the major economies that is expanding the fastest. India is predicted to be the G20 country with the quickest rate of growth, per the May 2024 edition of the OECD Economic Outlook. India is expected to maintain its strong growth momentum, according to the World Bank’s global economic report, albeit it may slow down in the upcoming years.

India’s actual GDP Growth from 2019 to 2022

2019: actual GDP growth of 4.91% compared to the estimated 7% growth.
2020: The epidemic caused the expected growth to be far higher than the actual GDP drop of 5.78%.
2021: The economy recovered, outpacing many forecasts with an actual GDP increase of 17.92%.
2022: In keeping with optimistic expectations regarding the post-pandemic recovery, the actual GDP growth was 8.45%.

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