S&P Global Market Intelligence, a prominent analytics firm, has announced an upward revision to India’s economic growth forecast for the fiscal year 2024-25. The firm now expects the economy to grow by 6.8%, an improvement from the previous projection of 6.5%. The revised forecast takes into account stronger growth momentum and improved global prospects.
Economic Momentum and Global Prospects Drive Upward Revision
Ken Wattret, a global economist at S&P Global Market Intelligence, expressed confidence in India’s economic trajectory. He cited stronger than expected momentum at the start of the year, an improving global economic environment, and an expected easing of domestic financial conditions as key factors driving the upward revision. The firm has also raised its growth forecast for the fiscal year 2023-24 to 7.3% from the previous projection of 6.9%. This aligns with the Indian government’s expectation of a 7.6% growth rate for FY24.
GDP Expansion and Government Infrastructure Spending
Recent GDP data released by India revealed an 8.2% expansion in the first three quarters of the fiscal year. This growth was primarily propelled by government infrastructure spending, according to Wattret. However, S&P Global cautioned that lower public infrastructure spending could temper growth in the fiscal year 2024-25. The analytics firm anticipates India’s economy to grow by 6.1% in FY26 and 6.2% in FY27.
Capex Target for Current Fiscal Year
Despite the positive growth projections, the central government’s capital expenditure (capex) target for the current fiscal year saw a 16.9% increase from revised estimates. This indicates a more moderate growth trajectory compared to the previous fiscal year.
Inflation Projections and Potential Rate Cut
S&P Global also adjusted its inflation projections for India, predicting a decline to 5.1% in FY25 from the earlier estimate of 5.6%. This favorable adjustment has prompted speculation among experts regarding a potential rate cut during either the June or August policy meeting. In addition, the analytics firm lowered its FY26 inflation estimate to 4.9% from 5.15% projected in February.
Global Growth Projections and Manufacturing Sector
Notably, S&P Global revised its global growth projections upward to 2.6%, indicating an improvement of 0.3 percentage points from earlier forecasts. This revision reflects cautiously optimistic signals observed in recent PMI data, particularly for the struggling manufacturing sector. Adjustments to growth numbers in the United States, United Kingdom, and India played a significant role in this upward revision. Overall, S&P Global’s upgraded economic growth forecast for India, driven by stronger growth momentum and improved global prospects, provides a positive outlook for the country. However, caution is advised due to anticipated lower public infrastructure spending and potential inflation rate cuts. Nevertheless, the upward revision in global growth projections lends itself to a cautiously optimistic perspective for the future.
