S&P Global Maintains India’s Growth Forecast At 6.8%, Expects RBI Rate Cut In October

New Delhi, Sep 24 (KNN) S&P Global Ratings has reaffirmed India's economic growth forecast for the financial year 2024-25 at 6.8 per cent, noting that the Reserve Bank of India (RBI) may initiate interest rate cuts as early as October. In its latest economic outlook for the Asia-Pacific region, S&P also retained its growth projection for FY2025-26 at 6.9 per cent. 

The ratings agency highlighted that India's robust growth is expected to aid the RBI in managing inflationary pressures.

S&P observed that India’s GDP growth moderated in the June quarter due to the impact of high interest rates, which dampened urban demand. 

However, the country’s growth remains in line with the projected 6.8 per cent for the entire fiscal year. In the previous fiscal year (FY2023-24), India's economy experienced an impressive 8.2 per cent growth rate.

The report also underscored the Indian government’s commitment to fiscal consolidation, as outlined in Finance Minister Nirmala Sitharaman’s July Budget. 

A significant allocation of Rs 11.11 trillion was made for capital expenditure, with a fiscal target set to reduce the deficit below 4.5 per cent of GDP by FY2025-26.

S&P further noted that the RBI is likely to begin cutting interest rates in October, anticipating two rate reductions by the end of the current financial year, which concludes in March 2025. 

However, the agency flagged the central bank’s concerns about persistent food inflation. It stated that a sustained and meaningful decline in food prices is essential for maintaining headline inflation around the RBI’s 4 per cent target. For FY2024-25, inflation is expected to average around 4.5 per cent.

The RBI’s Monetary Policy Committee (MPC) is scheduled to meet from October 7-9. On Monday, the State Bank of India projected that the RBI would likely hold off on cutting rates in 2024 due to ongoing concerns over food inflation. 

The RBI has maintained its benchmark rate at 6.5 per cent since February 2023, leaving rates unchanged across nine consecutive policy reviews.

Speculation about an upcoming RBI rate cut has intensified following the US Federal Reserve’s decision to implement larger-than-expected rate reductions of 50 basis points, amid worries of a slowdown in the US economy.

(KNN Bureau)