S&P Global Ratings has raised India’s growth forecast for the current financial year to 6.4%, up from 6%. The rating agency attributed this revision to robust domestic momentum, which has compensated for the challenges posed by high food inflation and weak exports. However, S&P lowered its growth forecasts for the next fiscal year (2024-25) to 6.4% due to a higher base, subdued global growth, and the delayed impact of interest rate hikes.

The agency’s projection for India’s GDP growth is slightly higher than that of other international agencies, including the IMF, World Bank, ADB, and Fitch, which expect India’s GDP to expand by 6.3% in the current fiscal year. On the other hand, the Reserve Bank of India (RBI) has projected GDP growth at 6.5% for both the current and next financial year.

India’s economy grew by 7.2% in the fiscal year 2022-23, ended in March 2023. In the June quarter, the country’s real GDP grew by 7.8% year-on-year, up from 6.1% in the previous quarter. S&P noted that fixed investment has recovered significantly more than private consumer spending in India.

While there was a temporary spike in food inflation in India during the July-September quarter, it appears to have had little effect on underlying inflation dynamics. However, headline inflation remains above the RBI’s target of 4%, indicating that it will take some time before the rate cycle turns according to S&P. The agency also mentioned that central banks in countries like India, Australia, and the Philippines are dealing with lingering inflation risks.

S&P’s Economic Outlook for Asia Pacific states that emerging market economies like India, Indonesia, Malaysia, and the Philippines, with strong domestic demand, are expected to have the strongest growth this year and the next. The agency also discussed the economic outlook for China, stating that although the country’s outlook has improved, there are still obstacles to overcome. Despite a property downturn and subdued confidence, China’s growth momentum has slightly improved due to policy support, said Louis Kuijs, Asia-Pacific chief economist at S&P Global Ratings.

Overall, S&P believes that emerging market economies with solid domestic demand will continue to experience strong growth in the coming months.