Fitch Ups India 2024-25 Growth Forecast to 6.9%, Sees Slower Pace Ahead

Fitch Ratings on Wednesday raised its forecast for India’s GDP growth in 2024-25 to 6.9% from 6.5%, citing strong domestic demand, robust real income growth and easier financial conditions.

India’s economy expanded 7.8% in April-June, the fastest in five quarters, driven by services and manufacturing. Fitch, however, expects growth to slow to 6.3% in 2026-27 and 6.2% in 2027-28 as the economy operates above potential.

On inflation, the agency noted headline CPI hit a seven-year low of 1.6% in July, helped by lower food prices. It expects inflation to edge up to 3.2% by end-2025 and 4.1% by end-2026, with weak food price pressures persisting amid good rainfall and strong stockpiles.

Fitch sees the Reserve Bank of India cutting the repo rate by 25 basis points by end-2025, and holding till end-2026 before hiking again in 2027.

It said the government’s recent GST reform — shifting to two slabs of 5% and 18% and introducing a 40% rate for luxury and sin goods — will modestly boost consumption, helping offset the drag from US tariffs.

Trade tensions remain a risk, with the US imposing a 25% reciprocal tariff on India plus another 25% punitive levy over ties with Russia. Fitch expects these duties will eventually be negotiated lower, but cautioned that the uncertainty could weigh on sentiment and investment.

Last month, Fitch affirmed India’s long-term foreign currency rating at ‘BBB-’ with a stable outlook, flagging fiscal deficits, high debt, and weaker structural metrics compared with ‘BBB’ peers as constraints.