India's FY25 Growth Forecast Up to 6.8%

Ken Wattret, global economist at S&P Global Market Intelligence, expressed confidence in India's economic trajectory, stating, We have revised up 2024?s growth forecast for India due to stronger than expected momentum at the start of the year. An improving global economic environment and an expected gradual easing of domestic financial conditions will support economic activity.

Additionally, S&P Global raised India's growth forecast for the fiscal year 2023-24 to 7.3%, up from the previous projection of 6.9%. This optimism aligns with the government's expectation of a 7.6% growth rate for FY24. Recent GDP data released by India showed an 8.2% expansion in the first three quarters of the fiscal year, primarily propelled by government infrastructure spending, according to Wattret.

However, the analytics firm cautioned that lower public infrastructure spending could temper growth in FY25. It anticipates India's economy to grow by 6.1% in FY26 and 6.2% in FY27. Despite these projections, the central government's capex target for the current fiscal year saw a 16.9% increase from revised estimates, signaling a more moderate growth trajectory compared to the previous fiscal year.

Inflation projections also saw a favorable adjustment, with S&P Global predicting a decline to 5.1% in FY25 from the earlier estimate of 5.6%. This prompted speculation among experts regarding a potential rate cut in either the June or August policy meeting. The analytics firm further lowered its FY26 inflation estimate to 4.9% from 5.15% projected in February.

Moreover, S&P Global revised its global growth projections upward to 2.6%, indicating an improvement of 0.3 percentage points from earlier forecasts. This revision, driven by adjustments to growth numbers in the US, UK, and India, reflects cautiously optimistic signals observed in recent PMI data, especially for the struggling manufacturing sector.