S&P Ratings Raises India's FY24 Growth Forecast To 6.4%; Cuts FY25 Forecast

Economic growth in India is currently spurred by domestic momentum, but a deceleration is likely, says S&P Ratings

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S&P Ratings revised its India GDP growth forecast for the current financial year, while lowering it for the year ending March 2025, it stated in a note published on Monday. 

"We have revised up our projection for India's GDP growth for FY24 to 6.4%, from 6%, as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports," the global ratings agency stated in a research note on the outlook for Asia-Pacific. 

"Still, we expect growth to slow in the second half of the fiscal year amid subdued global growth, a higher base, and the lagged impact of rate hikes," it cautioned. As such, the ratings agency said that it has lowered its outlook for growth in FY25 to 6.4%, from 6.9%. 

Meanwhile, China's property weakness continues to weigh on the global economy, the report said, forecasting China's GDP growth at 5.4% in 2023, and 4.6% in 2024. "The latter figure aligns with our estimate of potential growth, suggesting economic slack will persist next year," it added.

Other Asia Pacific economies outside of China remain resilient, according to S&P Ratings. Growth this year and in 2024 should be the strongest in emerging market economies with solid domestic demand in Indonesia, Malaysia, and the Philippines, apart from India, it said. 

The composition of the recovery after the pandemic slump differs across the region, the ratings agency said. With the exceptions of Hong Kong and Thailand, GDP exceeded the 2019 level by between 0.1% in Japan and 15.5% in India, in the first half of 2023, it said. In Northeast Asia, India, Australia, and New Zealand fixed investment has recovered considerably more than private consumer spending. 

With core inflation continuing to ease, the region's central banks are unlikely to have to tighten monetary policy again, according to the ratings agency. "Still, given the pressure from higher-for-longer U.S. interest rates, we expect no meaningful falls in policy rates for the next six months."