Fitch Ratings Forecasts GDP Growth At 7.8% In Fiscal 2024
Recent quarterly data have shown that the GDP is rising much faster than gross value added, it says.
Fitch Ratings has forecasted the gross domestic product to grow by 7.8% in the current financial year and 7% in the next fiscal, both sizable upward revisions.
Economic growth has continued to outperform quarterly forecasts, with the real GDP rising 8.4% year-on-year in the October–December period, higher than the forecasted 6.1%.
"With GDP growth having exceeded 8% for three consecutive quarters, we expect an easing in growth momentum in the final quarter of the current fiscal year, implying an estimate of 7.8% for growth in FY24 (marginally higher than the government's estimate of 7.6%)," Fitch Ratings said in a note on Thursday.
Recent quarterly data have shown that the GDP is rising much faster than gross value added — indirect taxes net of subsidies is the difference between the two — and this unusually wide gap may normalise, the ratings agency explained.
"We expect the Indian economy to continue its strong expansion, with real GDP forecast to increase by 7.0% in FY25, a 0.5 percentage point upward revision from our December forecasts," it said. Domestic demand, especially investment, will be the main driver of growth, amid sustained levels of business and consumer confidence.
The forecasts imply that growth in the short term will outpace the economy's estimated potential, and that the pace of growth of activity will then moderate towards the end in FY25, with real GDP rising 6.5%, according to the agency.
Fitch forecasts inflation to steadily decrease to 4% by the calendar year-end on the assumption that recent food price volatility will subside. "We now think that the RBI will cut rates only in the second half of 2024 and by 50 basis points (revised from 75bps in December) in view of the stronger growth outlook."
