New Delhi, Fitch Ratings has unveiled its optimistic outlook for India, foreseeing the nation to be among the world’s fastest-growing economies with a projected resilient GDP growth of 6.5% in the fiscal year 2024-25. The rating agency’s comprehensive analysis points to sustained high demand in crucial sectors such as cement, electricity, and petroleum products. High-frequency data for 2023 indicates a sustained level well above pre-COVID-19 pandemic levels.
In a recent report, Fitch emphasizes that India’s escalating infrastructure spending will play a pivotal role in boosting steel demand, with a notable rise expected in car sales despite an anticipated moderation after robust growth in 2023. Currently, India holds the position of the world’s fifth-largest economy, following the United States, China, Germany, and Japan. The report envisions India’s GDP surpassing Japan’s by 2030, positioning the country as the second-largest economy in the Asia-Pacific region.
The robust economic growth projected by Fitch is anticipated to stimulate demand at the corporate level, overcoming challenges posed by slowing growth in key overseas markets. Despite this, the rating agency asserts that easing input cost pressures will contribute to a 290-basis point increase in profits for the financial year ending March 2025 compared to the levels in 2022-23. This positive trajectory is expected to aid companies in maintaining sufficient rating headroom, even with higher capital expenditure.
Fitch’s insights also delve into the Information Technology (IT) sector, a significant contributor to India’s GDP. While acknowledging the likelihood of slowing demand in the United States and the eurozone impacting sales growth for IT services, the report emphasizes that the corresponding easing of employee attrition and wage pressure is poised to underpin higher profitability.
The forecast further underscores that rising demand across various sectors, including cement and steel, will help maintain industry balance despite the faster pace of new capacity additions. Fitch expresses confidence in India’s structural demand visibility, government-initiated supply-side reforms, and the healthier state of corporate and bank balance sheets contributing to a further increase in capital expenditure across most sectors.
This positive outlook from Fitch aligns with similar projections from other global entities, including the International Monetary Fund (IMF), Goldman Sachs, and S&P. Earlier this week, the IMF projected India to achieve a growth rate of 6.3% in the financial year 2023-24 and the subsequent year, citing macroeconomic and financial stability as key drivers.
Goldman Sachs Research, in December 2023, anticipated India to lead in growth among 13 major economies in 2024, with a growth rate of 6.2%, while S&P predicted India’s GDP to grow between 6-7.1% annually in fiscal years 2024-2026.
The Reserve Bank of India (RBI) recently revised India’s GDP growth forecast for the financial year 2023-24, raising it by 50 basis points to 7%. This upward revision followed India’s reporting of a higher-than-expected GDP growth of 7.6% in the July-September quarter.
