The American rating agency, however, lowered the FY25 growth estimate by 0.5 percentage points to 6.4%. It expects the economy to bounce back to 7% growth in FY26 and FY27.
The upward revision by the global rating agency follows a similar revision by the International Monetary Fund, which revised India’s growth forecast for FY24 upward to 6.3% in October from 6.1% projected earlier and brings it on par with World Bank (6.3%) and ADB (6.3%).
Indian economy likely grew better than expected at 6.7% in the second quarter of FY24, according to a median of an ET poll of 10 economists, compared with 6.5% projected by RBI.
| (FY24 growth forecast, %, y-o-y) |
|
| S&P Global Ratings |
6.4 |
| World Bank |
6.3 |
| IMF |
6.3 |
| ADB |
6.3 |
| RBI |
6.5 |
The economy recorded a 7.8% growth in the first quarter of FY24 on the back of solid consumption activity and services growth.Experts noted that despite slowing services growth in the second quarter, robust manufacturing and construction activity likely contributed to growth in Q2.“Service sector activity likely stayed buoyant in 2Q, besides manufacturing growth, as signalled by stronger high-frequency prints including PMIs, capacity utilisation, credit growth, infrastructure indices etc,” said Radhika Rao, senior economist, DBS.
The government will release GDP growth numbers for Q2FY24 on November 30.
Economists contend that strong consumption demand, especially in urban areas and a revival of rural demand is likely to help growth in the current fiscal. Private sector investment pick-up is likely to help growth in FY25.
The government has ramped up its capex spending to crowd in private investment. The general government capex was up by nearly a third in the first half of FY24.
On a better footing
The rating agency also increased growth estimates for the major Asia-Pacific economies. The growth for the entire region was also revised upwards to 4.7% in 2023 from 4.3% projected earlier.
The pick-up in the Chinese economy spurred a 0.6 percentage point revision by S&P to 5.4% in 2023. The faster pace of growth of China is likely to bring better growth prospects for the rest of the region, as it is a significant importer of goods from the region.
Vietnam’s growth was revised upward to 4.9%; their economy is likely to grow a shade slower than India’s at 6.3% in 2024 and 6.8% for 2025 and 2026, with India retaining the fastest-growing major economy tag for the period.
