S&P Ratings raises India’s growth forecast to 6.8% for next fiscal

New Delhi, March 26

S&P Global Ratings on Tuesday raised India’s growth forecast for the next financial year to 6.8 per cent, but flagged restrictive interest rates as a dampener for economic growth.

The Indian economy is estimated to have clocked a growth of 7.6 per cent in the current fiscal. In November, last year, the US-based agency had projected India’s growth to be 6.4 per cent in 2024-25 fiscal on robust domestic momentum. “For Asian emerging market economies, we generally project robust growth, with India, Indonesia, the Philippines, and Vietnam in the lead,” S&P said in its Economic Outlook for the Asia Pacific.

In largely domestic demand-led economies such as India, Japan, and Australia, the impact of higher interest rates and inflation on household spending power reduced sequential GDP growth in the second half, S&P said.

“We expect India’s real GDP growth to moderate to 6.8 per cent in fiscal year 2025 (ending March 2025),” S&P said. Restrictive interest rates are likely to weigh on demand next fiscal year, while regulatory actions to tame unsecured lending will affect credit growth. A lower fiscal deficit will also dampen growth, it added.

“Even as we expect a mild slowdown in Asian EM economies, we generally see solid domestic demand growth and a pick-up in exports to drive robust growth, with India, Indonesia, the Philippines and Vietnam in the lead,” S&P said. It said high real policy rates will choke demand and are therefore likely to strengthen the case for lowering rates. — PTI 

Praises RBI for taking strict steps

• S&P Global Ratings on Tuesday said the RBI was showing serious commitment to improving governance and transparency in the sector
• The recent measures by the RBI will curtail lenders' over-exuberance, enhance compliance culture, and safeguard customers, but the drawback will be higher capital costs for institutions