S&P Global, Morgan Stanley peg India's GDP growth at 6.4% in 2024

India’s economic growth – as measured by the gross domestic product (GDP) – is likely to average out at 6.4 per cent for fiscal 2024 (ending March 2024) and in FY25, according to a note by S&P Global. The rating agency has cautioned against high food inflation and weak exports, which it believes, can cast a shadow on growth in the years ahead.

“We have revised up our projection for India's GDP growth for fiscal 2024 (ending March 2024) to 6.4 per cent from 6 per cent, as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports. Still, we expect growth to slow in the second half of the fiscal year amid subdued global growth, a higher base, and the lagged impact of rate hikes. As a result, we have lowered our outlook for growth in fiscal 2025 to 6.4 per cent, from 6.9 per cent,” the note said.

Earlier in November, analysts at Morgan Stanley, too, had pegged India’s GDP growth at 6.4 per cent for calendar year 2024. Those at Goldman Sachs, on the other hand, see the Indian economy growing a tad lower at 6.3 per cent in the year ahead.

That said, S&P expects growth to be the lowest in developed economies that are exposed to the weak global trade conditions (South Korea, Taiwan, Singapore), or where the central bank has raised interest rates sharply to combat inflation (Australia, New Zealand). Still, it sees expect GDP growth in 2023 to exceed 1 per cent in all Asia-Pacific economies.

“The composition of the recovery after the pandemic slump differs across the region. With the exceptions of Hong Kong, and Thailand, GDP exceeded the 2019 level by between 0.1 per cent in Japan and 15.5 per cent in India, in the first half of 2023. We project a modest pick-up in growth in 2024, due to a gradual improvement in external demand and some monetary policy easing. Overall, we expect the region excluding China to grow by 4.2 per cent in 2024 and 4.4 per cent in 2025, compared to 4.1 per cent in 2023,” S&P said.

Higher for longer

As regards India, S&P Global expects the rates to remain higher for longer as food inflation remains elevated. This, it said, will prompt the Reserve Bank of India (RBI) to keep rates elevated.

“In India, there was a transitory spike in food inflation in the July-September quarter, but it appears to have had little effect on underlying inflation dynamics. Still, headline inflation remains above the Reserve Bank of India's (RBI) target of 4 per cent, suggesting it will be a while before the rate cycle turns,” the S&P Global note said.

Those at Goldman Sachs, too, expect inflation to remain sticky at 5.1 per cent (average) amid repeated supply shocks in the year ahead. It is in this backdrop that Goldman Sachs has pegged the GDP growth to remain around 6.3 per cent y-o-y in 2024.

“We expect government intervention to keep a lid on food inflation, where possible, in an election year. We expect core inflation to only decline to 4.5 per cent y-o-y (average) in 2024 from an estimated 5.1 per cent in 2023 given food and oil supply shocks and a steady growth outlook,” wrote wrote Andrew Tilton, chief Asia-Pacific economist and head of EM economic research at Goldman Sachs in the note co-authored with Santanu Sengupta and Arjun Varma.