Fitch Ratings, a prominent rating agency, forecasts India as one of the world’s fastest-growing nations in the 2024-25 fiscal year. The agency predicts India’s Gross Domestic Product (GDP) to expand by a robust 6.5 percent. This follows a strong growth rate of 6.9 percent in the current fiscal year.
Strong Demand Driving Growth
Key sectors like cement, electricity, and petroleum products are expected to sustain strong demand, significantly higher than pre-pandemic levels. This trend is backed by high-frequency data from 2023. India’s GDP growth is further bolstered by increased infrastructure spending, significantly impacting steel demand. The automobile industry is anticipated to maintain its growth trajectory, although a slight moderation is expected after a surge in 2023.
India’s Global Economic Standing
Currently, India holds the position of the fifth-largest economy globally, trailing the United States, China, Germany, and Japan. By 2030, projections indicate that India could surpass Japan, becoming the second-largest economy in the Asia-Pacific region.
Corporate Sector and Profit Boost
Fitch notes that India’s robust economic growth will positively impact corporate demand, even amid slower growth in major international markets. A reduction in input costs is also expected, contributing to a notable increase in corporate profits by 290 basis points above the levels of 2022-23. This profit boost will aid companies in maintaining sufficient rating headroom, even with increased capital expenditures.
The IT Sector and Economic Balance
The IT sector, a significant contributor to India’s GDP, may experience moderated sales growth due to reduced demand in the US and eurozone. However, easing employee turnover and wage pressures are likely to enhance profitability. Additionally, the cement and steel sectors are expected to maintain a balanced industry environment, despite accelerated capacity additions.
Government Reforms and Corporate Investment
Fitch acknowledges the Indian government’s supply-side reforms and the improved health of corporate and bank balance sheets. These factors are expected to drive an increase in capital expenditure across most sectors, building on the uptick observed in the fiscal year 2023.
Global Perspectives on India’s Growth
The International Monetary Fund (IMF) has projected India’s growth at 6.3 percent for both the current and next financial years. Goldman Sachs Research ranks India’s growth as the highest among 13 large economies for 2024, at 6.2 percent. Similarly, S&P expects India’s GDP to grow between 6 and 7.1 percent annually from 2024 to 2026. The Reserve Bank of India (RBI) recently revised its growth forecast for the financial year 2023-24 upwards by 50 basis points to 7 percent, following a stronger-than-expected growth report for the July-September quarter at 7.6 percent.
In conclusion, India’s economic outlook for 2024-25 is highly optimistic, with various sectors contributing to its robust growth. The nation’s strategic position in the global economy continues to strengthen, promising a bright future ahead.