Global rating agency Fitch Ratings continues to have confidence in India, Fitch has maintained India’s rating at ‘BBB-‘ with stable outlook.
India’s growth will be the fastest
Fitch says India is set to remain one of the fastest-growing countries globally over the next few years, as India’s strong economic momentum remains quite resilient.
Fitch estimates that India’s GDP growth could be 6.9% in fiscal year 2024, whereas in May 2023, Fitch had estimated 6% growth. However, after this, GDP growth is expected to reduce to 6.5% in the financial year 2025.
These are the reasons for fast growth
Fitch’s report said that investment will remain the main reason behind this growth, as the government’s capex is expected to continue and private investment will also come gradually. Due to decline in household savings, consumption is likely to decline further in the near term.
The rating agency said headline inflation will decline to 4.7% by the end of 2024, from 5.7% in December 2023. According to the agency, under this inflation outlook, we are estimating that the Reserve Bank will cut its policy rate by 75 basis points in the financial year 2025.
India will achieve fiscal deficit target
The rating agency expects the government to be able to achieve the fiscal deficit target of 5.9% of GDP in FY 2024. However, the general government fiscal deficit will remain at 8.6% of GDP in FY 2024. Fitch said that we estimate that based on the central government’s deficit of 5.4%, the general government fiscal deficit will reduce to 8.1% of GDP in FY 2025.
General government debt is also likely to remain high at 82.7% of GDP in FY2024, compared with 56% for similarly rated peers, the rating agency said.
