According to a report by S&P Global Ratings, India is projected to be the fastest-growing major economy, with an expected growth rate of 6.7% over the next three years. The agency maintained its growth forecast of 6% for FY24 but anticipated a significant rebound to 6.9% in FY25 and FY26.
India’s economy already demonstrated strong performance, growing at 7.2% in 2022-23. S&P Global Ratings noted that the growth in the March quarter exceeded their expectations, leading to a revised GDP growth estimate of 7.2% for fiscal 2023.
S&P Global Ratings emphasized that India, Vietnam, and the Philippines would experience the swiftest growth, reaching approximately 6%. The report also predicted improved growth in the region, excluding China, at 4.4% in 2024, driven by more favorable monetary conditions and global growth. The report highlighted India’s robust investment momentum and domestic resilience.
Regarding inflation, S&P projected a decline in fuel and core inflation due to lower crude prices and moderating demand. They expected 5% inflation for FY24, assuming a normal monsoon, with a further decrease to 4.5% over the next two years. S&P Global Ratings believed that the inflation and rate hike cycles had peaked. However, they anticipated the Reserve Bank of India to cut rates only in early 2024 to ensure consumer inflation aligns with the target range of 4%.
S&P Global Ratings predicted a decline in interest rates to 6.25% by the end of this year, followed by another percentage point decrease in the following year. Nevertheless, they did not anticipate rates to fall below 5% in the medium term.
In June 2023, the Reserve Bank of India maintained the policy rate at 6.5% for the second consecutive meeting. Economists expect the monetary policy committee to keep rates unchanged in its August meeting. Since May 2022, the policy rate has been increased by 2.5 percentage points.
