Fitch Ratings has raised India’s growth forecast for 2023-24 to 6.3 per cent from its earlier estimate of 6.0 per cent in March — making the country one of the fastest-growing major economies in the world.

In a report published on Thursday, the rating agency said the stronger outturn in the Jnauary-March quarter of 2023 and near-term momentum have prompted it to upgrade India’s growth outlook. “Recent high-frequency data point to sustained near-term momentum as highlighted by rising PMI indices, higher car sales, and increased power consumption,” Fitch Ratings said in its report.

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It added the Indian economy also continues to benefit from high bank credit growth and infrastructure spending, with more to come from the latter.

At the same time, the government’s push for increased capital expenditure, moderation in commodity prices and robust credit growth are expected to support investment.

“Slowing inflation should also start to help consumers over time and households have now turned more optimistic about future earnings and employment,” it added.

Further, according to the provisional estimates released by the National Statistical Office (NSO) recently, real GDP growth for 2022-23 stood at 7.2 per cent, higher than the 7 per cent as was projected earlier. An upward revision in the 2022-23 GDP numbers is expected going forward.
For 2023-24, the central government sees growth at about 6.5 per cent.
India’s economy, however, according to the rating agency, will be affected to an extent by the ongoing slowdown in global trade.

The wholesale price inflation (WPI) also fell to its lowest in more than seven years, to an annual rate of minus 3.5 per cent in May.

Fitch Rating believes while inflation has eased, there are near-term upward risks in the second half of 2023 — given the monsoon outlook and the potential impact of El Nino.

“With growth expected to moderate further, and inflationary pressures easing, we expect the RBI to pause its rate cycle for the time being before cutting early next year – a change from our previous call of one more 25 basis points increase to 6.75 per cent,” it added.

At its two latest monetary policy meetings, RBI unanimously decided to keep the repo rate unchanged at 6.5 per cent. The repo rate is the rate of interest at which the RBI lends to other banks.

A consistent decline in inflation (currently at an 18-month low) and its potential for further decline may have prompted the central bank to put the brake on the key interest rate again. Most analysts had expected the RBI to continue keeping the repo rate unchanged.

Inflation has been a concern for many countries, including advanced economies, but India, as the numbers suggest, has managed to steer its inflation trajectory quite well.

Retail inflation in India further eased sharply in May to 4.25 per cent, hitting a two-year low. It was at 4.7 per cent in April and 5.7 per cent the previous month.

Retail inflation or (Consumer Price Index) in India peaked at 7.8 per cent in April 2022.