The revision was attributed to robust domestic demand and sustained growth in both business and consumer confidence. Anticipating a growth rate of 7.8 per cent for the current fiscal, slightly above the government’s projection of 7.6 per cent, Fitch emphasised the pivotal role of domestic demand, particularly in investment, as the primary driver of the growth.
The agency projected that growth in the short term would surpass the economy’s potential, moderating towards trend levels by FY25, with real GDP anticipated to rise by 6.5 per cent in FY26.
Fitch highlighted the brightened prospects for emerging markets, especially India, with growth forecasts revised upward for FY24 and FY25. Despite the expectation of growth momentum easing in the final quarter of the current fiscal year following consecutive quarters of over 8 per cent GDP growth, Fitch maintained a positive outlook.
However, Fitch revised China’s 2024 growth forecast downward to 4.5 per cent from the earlier estimate of 4.6 per cent, citing concerns about the property sector and emerging deflationary pressures.
The Reserve Bank of India (RBI) meanwhile retained its key policy rate at 6.5 per cent, emphasising a hawkish stance aimed at curbing inflation towards the target of 4 per cent.
Fitch underscored the significance of food prices, which constitute around half of India’s consumer price index, in determining inflation dynamics even as it anticipated headline inflation to gradually decrease to 4 per cent by the end of the calendar year, assuming a stabilisation in recent food price fluctuations.
With a stronger growth outlook, Fitch revised its expectation for RBI rate cuts to the second half of 2024, projecting a reduction of 50 basis points, down from the previously anticipated 75 basis points.
Fibre2Fashion