S&P Global keeps India's economic growth forecast unchanged at 6% in FY24
2 min read 27 Mar 2023, 12:53 PM ISTIn the quarterly economic update for Asia-Pacific, S&P saw inflation rate easing to 5 percent in 2023-24 fiscal, from 6.8 percent in the current financial year.
PremiumThe global credit rating agency S&P Global Ratings on 27 March has kept India's economic growth forecast unchanged at 6 percent in the fiscal year starting 1 April, before rising to 6.9 per cent in the following year.
In the quarterly economic update for Asia-Pacific, S&P saw inflation rate easing to 5 percent in 2023-24 fiscal, from 6.8 per cent in the current financial year, news agency PTI has reported.
The rating agency also saw India's gross domestic product (GDP) likely growing by 7 per cent in the current financial year ending March 31 (2022-23), before slowing to 6 percent in the next 2023-24 fiscal.
Also Read: Indian economy likely to grow 6% in FY24: Crisil
"India leads, with average growth of 7 percent in 2024-2026," the update said.
Furthermore, S&P said that India's GDP is projected to rise to 6.9 percent in the following two financial years i.e. 2024-25 and 2025-26 and rising to 7.1 percent in 2026-27.
"In India, domestic demand has traditionally led the economy. But it has become more sensitive to the global cycle lately, in part due to rising commodity exports; and its year-on-year GDP growth slowed to 4.4 per cent in the fourth quarter (October-December 2022)," the rating agency said.
Pronounced core inflation in India suggests little slack in these economies, S&P said.
S&P expected the Reserve Bank of India to raise its already high policy rate further following a recent upside surprise to inflation.
"In our view, India's Consumer Price Index (CPI) inflation should moderate to 5 per cent in fiscal year 2024 (ending March 2024) but we also anticipate upside risks, including from weather-related factors," it said.
Stating that the current account balances of energy-importing economies in the Asia-Pacific have deteriorated, the rating agency said in India, the external deficit reached about 3-3.5 per cent of GDP in 2022.
S&P Global Ratings maintained "cautiously optimistic outlook for Asia-Pacific," saying China's economy was on track to recover this year.
S&P Global Ratings chief economist Louis Kuijs said, “We believe the recovery in China will be largely organic, led by consumption and services. Our GDP growth forecast of 5.5 percent this year, up from 4.8 percent in November, exceeds the target of around 5 per cent announced at the National People's Congress meetings in March."
External pressure from rising US interest rates will likely lift interest rates. The US and the eurozone are likely to slow significantly in 2023.
"We expect only 0.7 percent growth in the US this year and 0.3 per cent in the eurozone," the agency said.
“China's recovery won't fully offset the impact of the slowdown in the US and Europe on the Asia-Pacific region. But it will alleviate it. The likely acceleration in China this year is broadly comparable to the likely slowdown in the US and Europe."
Earlier, the rating agency had said that Indian lenders are capable of enduring any potential contagion effects emanating from the US banking turmoil and UBS's recent takeover of embattled Swiss lender Credit Suisse given their manageable exposures to their global counterparts.
S&P also said Indian banks had sufficient buffers to withstand losses on their sizable government securities portfolio due to rising interest rates. Analysts have said that Indian banks are now in a better position to withstand stress given their current capital levels and healthy asset quality.
(With inputs from PTI)
