India’s economic outlook appears promising in the medium term despite global challenges, according to S&P Global Ratings. They anticipate robust domestic activity to counterbalance international difficulties. The projection suggests a growth rate of 6.7-7% annually between 2024-2026, signaling a strong trajectory for India’s GDP expansion. Vishrut Rana, an economist at S&P Global Ratings, highlighted the country’s potential for sustained growth at 6.4%-7% during these fiscal years.
India’s growth projections are on an upward trend, with American rating agency revisions indicating an increased forecast of 6.4% for FY24, up from the earlier 6%. Further optimism comes from the Reserve Bank of India, which has revised its forecast even higher to 7% for the same fiscal year. Vishrut Rana highlighted the influence of strong domestic momentum in counteracting challenges posed by high food inflation and sluggish exports
According to the global credit rating agency’s report, weak loans within India’s banking sector are anticipated to decrease to 3-3.5% of gross advances by the end of FY25. This positive change is credited to structural improvements, including healthier corporate balance sheets, stricter underwriting standards, and better risk management practices. The report also stressed that interest rates in India are expected to remain relatively stable, mitigating risks for the banking industry. Additionally, global uncertainties are projected to exert a lesser impact on the Indian economy.
According to Fitch Ratings’ recent Global Economic Outlook, India has the potential to achieve a 6.2% average annual growth rate in the medium term, spanning 2019 to 2027. This heightened potential growth for the Indian economy contrasts with a downward revision by the Global Credit Rating Agency for the medium-term growth potential of 10 emerging economies. The agency lowered the estimate from 4.3% to 4%, mainly influenced by a reduced growth outlook for China.
S&P foresees a positive trajectory for India Inc.’s credit quality and the banking sector’s asset quality in the upcoming year, leading to a reduction in the cost of credit. Neel Gopalakrishnan, an analyst at S&P Global Ratings, highlighted the expected improvement in credit quality for rated Indian corporates in 2024. This optimistic outlook is attributed to a favorable operating environment, a growing economy, enhanced balance sheet discipline, and accessible financing channels. S&P also acknowledged the companies’ continued focus on debt reduction through prudent growth plans. Despite the rise in corporate borrowing, the report noted potential growth hindrances due to the uncertain economic landscape. Nevertheless, S&P anticipates a continuation of positive credit momentum in 2024.
