S&P Global Ratings has affirmed India’s GDP growth forecast at 6.8% for the fiscal year 2024-25, while simultaneously reducing China’s economic growth outlook by 0.2 percentage points to 4.6% for the calendar year 2024.
In its quarterly economic outlook for the Asia-Pacific region, S&P noted that India’s GDP growth slowed in the June quarter due to high interest rates affecting urban demand. The agency expects this trend to align with its projected growth of 6.8% for the full fiscal year.
The robust growth in India enables the Reserve Bank of India (RBI) to concentrate on aligning inflation with its targets. S&P has also retained its growth forecast for India for FY 2025-26 at 6.9%.
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In contrast, S&P has cut China’s GDP growth forecast for 2025 to 4.3%, reflecting challenges in the property sector, subdued domestic demand, and a cautious approach by policymakers regarding fiscal stimulus.
The Indian government’s commitment to fiscal consolidation was reinforced in the recent budget, which allocated Rs 11.11 lakh crore for capital expenditure. Additionally, the government aims to reduce the fiscal deficit to below 4.5% of GDP by FY 2025-26.
The report indicates that the RBI is expected to implement its first rate cut in October, given that inflation has fallen within the targeted range. However, it notes that food inflation remains a concern. The RBI has stated that without a significant and sustained reduction in food price inflation, maintaining overall inflation at around 4% will be challenging.
S&P anticipates that the RBI will initiate rate cuts as early as October, projecting two reductions in the current fiscal year, which ends in March 2025.
