S&P Global has revised its forecast for India's real economic growth in the upcoming financial year (2024-25), signaling both optimism and caution amidst a complex economic landscape.
The rating agency adjusted its projection upwards by 0.4 percentage points, now expecting a growth rate of 6.8%.
However, this forecast remains lower than the 7.6% GDP expansion rate estimated by India's official statistics agency for the current fiscal year.
In its "Economic Outlook Asia-Pacific report," S&P Global highlighted several factors expected to influence India's economic trajectory in the coming year. Among these factors are anticipated higher interest rates, a crackdown on unsecured lending, and efforts to reduce the fiscal deficit.
These measures, while aimed at strengthen financial stability, are projected to pose challenges to growth prospects in the next fiscal period.
S&P Global emphasized the impact of recent regulatory measures enacted by the Reserve Bank of India (RBI) to address concerns surrounding excessive lending practices.
The agency noted that while these actions are likely to promote responsible lending behavior and protect consumers, they may also lead to higher capital costs for financial institutions. Recent interventions by the RBI include restrictions on certain types of lending activities by prominent financial entities such as Paytm Payment Banks, IIFL Finance, and Jm Financial Products Ltd.
“Governance and transparency are key weaknesses for the Indian financial sector and weigh on our analysis. The RBI’s new measures are creating a more robust and transparent financial system,” S & P Global credit analyst Geeta Chugh said.
Despite acknowledging potential upward risks to inflation, particularly stemming from global factors such as disruptions in international shipping, S&P Global believes these risks are currently moderate. The agency expressed confidence that, barring significant global shocks, the overall impact on inflation is likely to remain manageable.
Follow us
