New Delhi [India], December 22 : Fitch Ratings expects India to be among the world's fastest-growing countries, with resilient GDP growth of 6.5 per cent in 2024-25. For the current financial year 2023-24, it pegs GDP growth at 6.9 per cent.
"Demand will remain strong for cement, electricity and petroleum products, with high-frequency data in 2023 sustained at well above pre-Covid-19 pandemic levels. India's rising infrastructure spending will also boost steel demand. Car sales will continue to rise, despite our expectation of moderation after robust growth in 2023," Fitch said in a report on Friday.
India is currently the world's fifth-largest economy, following the US, China, Germany, and Japan. By 2030, India's GDP is projected to exceed Japan's, making India the second-largest economy in the Asia-Pacific region.
India's robust economic growth will boost demand at corporates, despite weakness from slowing growth in key overseas markets, said the rating agency.
This, and easing input cost pressure, should boost profits in the financial year ending March 2025 by 290 basis points above 2022-23 levels, helping corporates maintain adequate rating headroom, despite higher capital expenditure.
Speaking about India's IT sector, a big contributor to GDP, the rating said slowing demand in the US and eurozone is likely to moderate sales growth for IT services, but a corresponding easing of employee attrition and wage pressure should underpin higher profitability.
Rising demand in the economy will help maintain industry balance in the cement and steel sectors, despite a faster pace of new capacity additions, the rating agency added.
"We believe India's structural demand visibility, supply-side reform by the government and healthier corporate and bank balance sheets will enable a further increase in capex across most sectors following an uptick in FY23."
Earlier this week, the International Monetary Fund (IMF) projected India to grow at 6.3 per cent in the current financial year 2023-24 and the next. IMF said the country's growth is expected to remain strong, supported by macroeconomic and financial stability.
In December 2023, Goldman Sachs Research projected India's growth rate to be the highest among 13 large economies in 2024, at 6.2 per cent. China is projected to be second at 4.8 per cent.
S&P also projected India's GDP to grow 6-7.1 per cent annually in fiscal years 2024-2026. The Reserve Bank of India has forecast a 6.5 per cent economic growth for the 2023-24 and 2024-25 fiscal years.
The Reserve Bank of India (RBI), meanwhile maintaining the status quo in key policy rates, raised India's GDP growth forecast for the financial year 2023-24 by 50 basis points to 7 per cent. In its October meeting, the RBI forecast 2023-24 growth at 6.5 per cent.
This upward revision by the Indian central bank came on the heels of India reporting more-than-expected July-September quarter growth - 7.6 per cent.
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