S&P Global Ratings on Tuesday maintained India's growth forecast at 6.8 per cent while noting that the Reserve Bank of India (RBI) may cut interest rates in October. In its economic outlook for the Asia-Pacific region, S&P also retained its gross domestic product (GDP) growth forecast for the financial year 2025-26 (FY26) at 6.9 per cent. It noted that India’s strong growth would help the RBI manage inflation.
"In India, GDP growth moderated in the June quarter as high interest rates tempered urban demand, in line with our projection of 6.8 per cent GDP for the full financial year 2024-25," S&P said. In FY24, India's economic growth rate reached an impressive 8.2 per cent.
Highlights Centre's focus on fiscal consolidation
S&P also emphasised the Centre’s focus on fiscal consolidation, as outlined by Finance Minister Nirmala Sitharaman in the July Budget. The budget allocated a total of Rs 11.11 trillion for capital expenditure. The Centre has set a target to bring down the fiscal deficit below 4.5 per cent of GDP by FY26.
"Our outlook remains unchanged: we expect the RBI to begin cutting rates in October at the earliest and have pencilled in two rate cuts this financial year (ending March 2025)," S&P said. It noted the central bank’s concern about food inflation, stating that unless there is a lasting and meaningful decline in food price increases, it will be tough to maintain headline inflation at 4 per cent. It also estimated inflation to average 4.5 per cent in the current financial year.
RBI MPC meet on October 7-9
The RBI's monetary policy committee (MPC) is scheduled to meet on October 7-9. On Monday, the State Bank of India projected that the RBI was unlikely to cut interest rates in 2024 due to concerns over food inflation. The RBI MPC has not altered rates since February 2023, maintaining it at 6.5 per cent for the past nine policy reviews.
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