Fitch foresees India’s retail inflation easing to 4.7% by the end of 2024.- It raised FY24 GDP to grow at 6.9%, a tad lower than
RBI ’s 7% forecast. - With general elections slated this year, it expects policy continuity, with gradual fiscal consolidation and economic reform momentum.
Fitch also foresees headline inflation to ease to 4.7% by the end of 2024 from 5.7% in December 2023.
“Headline inflation was volatile in 2023 due to food price shocks, periodically exceeding the Reserve Bank of India's (RBI) 2-6% target band. However, core inflation decelerated, reaching 3.7% in December from around 6% at end-2022, which should help anchor headline inflation,” Fitch says.
Raises GDP growth outlook
Fitch’s FY24 growth projections at 6.9% are marginally lower than that of RBI, which forecasted 7% growth. However, Fitch also raised its GDP growth outlook for the country, as it had earlier forecasted 6% growth.
Investment, it believes will remain the key growth driver, as it sees government's capex drive is likely to continue, with a gradual acceleration in private investments. “Consumption is likely to moderate further in the near term due to reduced household savings buffers,” Fitch added.
India's general elections are likely to be held in the summer of 2024. It expects policy continuity, with gradual fiscal consolidation and economic reform momentum. “Polls indicate that the incumbent government led by the Bharatiya Janata Party under Prime Minister
Fitch affirmed India’s rating at 'BBB-' with a stable outlook. “India's rating is underpinned by a robust medium-term GDP growth outlook and sound external finances, which remain intact as the country has effectively navigated a fraught external environment in the past few years,” it added.