Fitch raises India's GDP forecast to 6.3% for current fiscal year

The growth forecast compares with 7.2 per cent GDP expansion in FY23.

Global ratings agency Fitch, on Thursday, raised its economic growth forecast for India for the current financial year (FY24), on back of a rebound in manufacturing, easing of inflation and sustained momentum in infrastructure investment.

In its latest ‘Global Economic’ outlook report, Fitch raised India’s FY24 gross domestic product forecast to 6.3 per cent from 6 per cent. This is closer to the government and Reserve Bank of India’s official estimate of 6.5 per cent.

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"The stronger outturn in January-March quarter and near-term momentum have prompted us to upgrade our FY23-24 growth forecast- one of the highest growth rates in the world," Fitch said.

GDP growth for the January-March (Q4FY23) quarter came in at a higher-than-expected 6.1 per cent, boosted by a recovery in manufacturing and increased private sector capital investment.

Fitch said the numbers showed a recovery in manufacturing, a boost from construction and an increase in farm output. In expenditure terms, GDP growth was driven by domestic demand and a boost from net trade.

Recent high-frequency data point to sustained near-term momentum as highlighted by rising PMI indices, higher car sales and increased power consumption, it added.

“The government’s push on increased capital expenditure, moderation in commodity prices and robust credit growth are expected to support investment. Slowing inflation should also start to help consumers over time and households have now turned more optimistic about future earnings and employment,” it said.

The agency said that with global growth expected to moderate further, and inflationary pressures easing, it expects RBI to pause its rate cycle for the time being before cutting early next year-- a change from its previous call of one more 25 basis points increase to 6.75 per cent.

Fitch did warn that there are near-term upward risks in the second half of current fiscal, given the monsoon outlook and the potential impact of El Nino.