Fitch, a prominent ratings agency, has revised its GDP forecast for India and now predicts a growth rate of 6.3% for the financial year 2023-24 (FY24). This upgrade from the previous estimate of 6% is a result of India’s strong momentum and impressive performance in the first quarter. Fitch highlights the resilience of India’s economy, citing positive indicators such as a 6.1% year-on-year GDP growth in Q1, robust auto sales, PMI surveys, and credit growth in recent months.
Improved Outlook Driven by Q1 Performance
Fitch acknowledges India’s outstanding economic performance in the first quarter, which surpassed expectations. The manufacturing sector rebounded after two consecutive quarters of contraction, benefiting from a significant boost in the construction industry and increased farm output. These factors contributed to the GDP growth during the January-March period.
Domestic Demand and Net Trade as Growth Drivers
Fitch emphasizes that robust domestic demand and favorable contributions from net trade were the primary drivers of GDP growth in terms of expenditure. Despite challenges posed by the pandemic and the global economic environment, India’s domestic demand remained resilient, supported by increased government spending, improved consumer sentiment, and a revival of business activities.
Reassessment of India’s Economic Prospects
Previously, Fitch had lowered its growth forecast for India to 6% from 6.2% due to concerns regarding high inflation, interest rates, and weak global demand. However, India has experienced a moderation in inflation and a notable recovery in its domestic economy since then. These positive developments led Fitch to reassess India’s economic prospects and revise its forecast upwards.
Comparative Analysis and Previous Growth Figures
The projected GDP growth rate of 6.3% for FY24 represents a decline compared to the 7.2% expansion witnessed in the previous financial year (FY23). It is important to consider that the growth in FY23 was achieved amidst the severe impact of the COVID-19 pandemic. In FY21, the Indian economy contracted by 7.3%, making the subsequent recovery in FY22 and FY23 commendable.
Fitch’s revision of India’s GDP forecast to 6.3% for FY24 reflects the country’s strong momentum and impressive performance. The resilience of India’s economy, driven by robust domestic demand and positive net trade contributions, has played a significant role in shaping this improved outlook. While the projected growth rate indicates a decline from the previous year, it underscores the commendable recovery achieved despite the challenges posed by the pandemic.
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India’s GDP Forecast – FAQs
Q1: What factors contributed to India’s impressive economic performance in the first quarter?
Ans: India’s remarkable economic success in the first quarter was attributed to elements like the manufacturing sector’s rebound, a boost from the construction industry, and increasing farm output.
Q2: Why did Fitch reassess India’s economic prospects?
Ans: Fitch reassessed India’s economic prospects due to positive developments such as a moderation in inflation and a notable pickup in the domestic economy.
Q3: What does Fitch’s revision of India’s GDP forecast indicate?
Ans: Given the nation’s strong momentum and resiliency in the face of obstacles, Fitch’s revised GDP projection for India shows a favourable prognosis for the economy.