S&P Global Ratings has revised its GDP growth projection for India in FY2024 to 6.4%, up from the previous estimate of 6%, citing the influence of robust domestic factors despite challenges. Conversely, the GDP growth forecast for FY2025 has been lowered to 6.4% from 6.9%, reflecting expectations of a slowdown in the latter half. S&P notes that India’s GDP has exceeded 2019 levels by 15.5%, with fixed investment exhibiting more significant recovery than private consumer spending. The agency anticipates a gradual reduction in India’s interest rates, foreseeing a decline of 100 basis points by March 2024, although this projection is lower than the RBI’s estimate of 6.6% for FY2025.
S&P Global also highlights a transitory spike in food inflation in India during the July-September quarter, which has seemingly had minimal impact on the underlying inflation dynamics. It expects a decline in interest rates, projecting a 100 basis points reduction by March 2024. The Consumer Price Index (CPI) inflation in India fell to 4.9% in October, following a peak of 7.4% in July. The note acknowledges the Monetary Policy Committee’s outlook for improved near-term inflation due to corrective measures in vegetable prices and a reduction in LPG prices.
Regarding the US, S&P Global foresees a gradual decline in inflation toward the US Federal Reserve’s target of 2%. Despite expecting another rate hike in December, it predicts the first cut to occur only in mid-2024. The note suggests a persistent strain from higher US interest rates on Asia-Pacific markets and currencies into 2024.
In the Asia-Pacific region, overall growth is expected to be strong, especially in emerging markets with solid domestic demand, including India, Indonesia, Malaysia, and the Philippines. For China, S&P Global has raised its 2023 growth forecast to 5.4%, anticipating China to grow in line with its potential in 2024. While acknowledging obstacles like the struggling property sector, S&P notes that growth momentum has slightly improved in China due to policy support, despite the ongoing challenge of a property downturn.
