Fitch raises India's mid-term GDP forecast to 6.2%

Global credit ratings agency Fitch Ratings has raised India's medium-term potential growth estimate by 70 basis points to 6.2%, up from its earlier forecast of 5.5%.

"We have made large upgrades to India and Mexico, with the latter benefitting from a much better outlook for the capital-to-labour ratio. India’s estimate is higher at 6.2% from 5.5% and Mexico’s at 2.0% from 1.4%," Fitch Ratings says in its latest 'Emerging Markets’ Potential Growth Estimate Lowered as China Slows' report.

Fitch Ratings has reduced its estimate of medium-term potential growth for the 10 emerging markets (EM) covered in its Global Economic Outlook (GEO) to 4.0% on a GDP weighted-average basis. This is down from 4.3% in our previous assessment in 2021.

Fitch Ratings says the cut in GDP forecast is "mainly due to a large reduction of 0.7pp to the estimate of China’s supply-side growth potential".

For China, the GDP estimate has been cut to 4.6% from 5.3%, for Russia to 0.8% from 1.6%, for Korea to 2.1% from 2.3% and for South Africa to 1.0% from 1.2%. The estimate for Poland has also been revised to 3% from 2.6%, that for Turkiye to 4.1% from 3.9%, that for Brazil to 1.7% from 1.5% and that for Indonesia to 4.9% from 4.7%.

The current forecast by Fitch comes days after audit and consulting firm Deloitte said India's GDP is expected to grow in the range of 6.5% to 6.8%, primarily due to festive spending in the coming months, followed by higher government spending before the upcoming general elections mid-next year.

Notably, the International Monetary Fund (IMF) has also said India will emerge as the world's third-largest economy by 2027, hopping over Japan and Germany, as its GDP crosses $5 trillion dollars. By 2047, India aspires to be a developed economy.

In October 2023, the World Bank said India’s GDP growth for FY23-24 will be at 6.3%, retaining its GDP estimate since its June forecast citing India continued "resilience" despite challenging global environment. Before that in June 2023, the World Bank had said India would remain the "fastest-growing economy" in FY24.

U.S.-based global ratings agency S&P Global Ratings has retained India's growth forecast in the financial year 2023-24 at 6%, saying that its forecast shows India's economy could grow at 6.9% in FY25 and FY26, respectively.

The government, on the other hand, says India's GDP growth outlook for the financial year 2023-24 remains "bright" and the economy could grow at 6.5% in the fiscal year. As per the finance ministry, the economic activity in the country has maintained its “momentum”, with high-frequency indicators suggesting the second quarter of the fiscal year is also shaping up well.