India’s economic growth will exceed 6.5% in the next fiscal, up from 6.3% this year, said Moody’s Ratings on Wednesday. It cited the higher government capex and consumption boost from tax cuts and interest rate reduction for this growth.
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India’s economic growth will exceed 6.5% in the next fiscal, up from 6.3% this year, said Moody’s Ratings on Wednesday. It cited the higher government capex and consumption boost from tax cuts and interest rate reduction for this growth.
Moody’s said that following a temporary slowdown in mid-2024, India’s economic growth is expected to reaccelerate and record one of the fastest rates among large economies globally. “Government capital expenditure, tax cuts for middle-class income groups to boost consumption and monetary easing will help India’s real GDP growth exceed 6.5% for fiscal 2025-26 from 6.3% in fiscal 2024-25,” the rating agency added.
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It also projected a stable outlook for the banking sector, and said although the operating environment of Indian banks will remain favourable in the next fiscal.
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Their asset quality will deteriorate moderately after substantial improvements in recent years, with some stress in unsecured retail loans, microfinance loans and small business loans, it added.
Banks’ profitability will remain adequate as declines in net interest margins (NIMs) are likely to be marginal amid modest rate cuts, it said.
In terms of inflation, Moody’s expected the average inflation rate to decline to 4.5% in fiscal 2025-26 from 4.8% in the previous year.
On the RBI repo rate, Moody’s said, “We expect further rate cuts to be modest, as the central bank takes a cautious stance amid global uncertainty around US trade policies, as well as associated market and exchange rate volatility, as represented by a strengthening of the US dollar against emerging market currencies in late 2024 and early 2025.”
It is to be noted that recently, the finance ministry’s Economic Survey has projected GDP growth for next fiscal at 6.3-6.8%. As per official estimates, GDP growth in the current fiscal would be 6.5%.
The country’s real GDP growth slowed to 5.6% in the July-September 2024 quarter before rebounding to 6.2% in the following quarter.
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