S&P Global raises India's FY24 GDP outlook to 6.4% from 6% earlier, trims FY25 projections

S&P Global Ratings has upped India's GDP forecast for the fiscal year 2024 from 6% to 6.4%, attributing the revision to robust domestic momentum outweighing challenges posed by high food inflation and sluggish exports.

However, while anticipating a stronger performance for FY24, the agency has simultaneously lowered its projection for the financial year 2025 from 6.9% to 6.4%.

The ratings agency attributed this adjustment to robust domestic momentum counteracting challenges stemming from elevated food inflation and sluggish exports.

S&P Global emphasized the persistence of headline inflation above the RBI's 4% target, projecting a prolonged period before India's interest rate cycle shifts.

The agency highlighted a transient surge in food inflation from July to September, but it seems to have had minimal effect on the underlying inflation dynamics, according to their analysis.

The possibility of India becoming the first Asian economy to reduce interest rates by June next year was highlighted in a recent note by Morgan Stanley, aligning with S&P Global's projection of a 100 basis point rate cut by March 2024.

Additionally, S&P Global's assessment of the global economic landscape indicates an anticipated decline in US inflation towards the Federal Reserve's 2% target. However, they foresee another rate hike in the December meeting and anticipate the first rate reduction to occur in mid-2024.

The agency predicts persistent strain from higher US interest rates on Asia-Pacific markets and currencies throughout 2024, with a resilient US economy likely necessitating prolonged higher rates.

As for China, S&P Global expects growth to align with its potential in 2024 after witnessing an improvement in growth momentum since August.

Fiscal and monetary easing measures are seen to be gaining traction, particularly in the real estate sector, prompting an upward adjustment in the 2023 growth forecast to 5.4%.

Also Watch: Morgan Stanley forecasts RBI's possible rate cut delay amid global economic pressures