Fitch raises India's GDP growth forecast for fiscal year 2025 to 7% versus the earlier projection of...

Fitch Ratings on Thursday raised its forecast for India's economic growth to 7% for fiscal year 2025 on the back of strong domestic demand and sustained level of business and consumer confidence.

FY24 growth estimate also upped

Fitch also sees the Indian economy expanding 7.8% in FY24, marginally higher than the government's estimate of 7.6%. This projection follows a stronger-than-expected 8.4% growth in gross domestic product (GDP) during the third quarter (October-December) of the current fiscal year,

India's strong domestic demand

In its latest 'Global Economic Outlook', the rating agency said India's economic growth continued to outperform quarterly forecasts with strong domestic demand.

Global economic outlook improves

For the world, Fitch Ratings has raised its 2024 GDP growth forecast by 0.3 percentage points to 2.4%, as near-term world growth prospects have improved.

This comes on the back of a sharp upward revision to its US growth forecast from 1.2% to 2.1%, in the December 2023 Global Economic Outlook (GEO).

"Stronger US growth prospects outweigh a marginal cut to our China 2024 growth forecast -- to 4.5 per cent from 4.6 per cent -- and a minor revision to our eurozone forecast, to 0.6 per cent from 0.7 per cent," it said.

The emerging markets picture

"Growth in emerging markets, excluding China, has been revised up by 0.1 percentage point to 3.2 per cent, with forecasts raised for India, Russia and Brazil." said Fitch. It expects world growth in 2025 to edge up to 2.5% as the eurozone finally recovers, on a pick-up in real wages and consumption, but as US growth slows.

India's growth may ease from current level

For India, Fitch Ratings said, "With GDP growth having exceeded 8 per cent 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 per cent for growth in FY24." Recent quarterly data has shown that 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.

Strong business survey data for January and February represents an upside risk to these estimates, it said.