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S&P Global Ratings, a leading credit rating agency has retained India”s GDP growth at 6% for fiscal year 2023-24. Forecast positions India as the fastest growing economy in Asia Pacific Nations. The rating agencies’ decision to maintain the growth outlook is based on the country’s domestic resilience. This forecast for current and next fiscal year remained unchanged from its March forecast. The report stated , “Asian emerging market economies will continue to outperform the world’s growth until 2026.” S&P also said that it expects inflation in India to soften to 5% by Fiscal 2023-24 and RBI to cut interest rates early next year.

India will be the fastest growing economy among the Asia Pacific Nations for the financial year that ends at 2024. That is the forecast of S&P Global Ratings, a leading global credit rating agency. In its quarterly economic update for Asia Pacific, S&P forecasted same growth for Vietnam & Phillippines alongside India. The World Bank had also predicted that India will remain the fastest growing major economy in terms of both aggregate & per capita GDP despite slowdown in growth . Projecting the growth for Financial Year 2023-24, fiscal years 2024-25, and 2025-26 at 6.3%, 6.4% & 6.5% respectively, the World Bank had said that “India will lift growth aspects of South Asian region”. However for China S&P has lowered the Growth Forecast to 5.4% from 5.5% in 2023. S&P stated that rest of the region, it has left growth forecast broadly unchangedin part because of domestic resilience . Earlier this month, Government of India’s Chief Economic Advisor B. Anantha Nageshwaran also said that India’s economy

will grow at 6.5% for rest of the decade except an occassional 7% growth in a year or so. He said capital investment in the Country will be in this financial year which will help India to grow at 0.5-1 percentage point higher than that projected by various rating agencies.

While the agency expects RBI to cut interest rates only early next year, it has said that retail inflation is likely to soften to 5% this fiscal from 6.7%, citing “normal monsoon” and “softer crude prices” as primary reason. However India’s retail inflation eased to a 2-year low of 4.25% in May on an annual basis as against 4.70% in April. In the monetary policy meeting of the RBI which concluded on 8th June, the RBI too revised downwards inflation forecast for fiscal year 2023-24. RBI cut inflation aim to 5.1% from 5.2% forecast in April policy. The assessment also raised assessment of India’s banking sector, citing “strong recovery underway” in Indian Financial Sector. India’s “Banking Industry Country Risk Assessment”, an indicator of an economy’s financial sector, has been raised 1 notch to 5 from 6 earlier . Risk scores range from 1 to 10, with 10 signalling highest risk. The rating agency also upgraded 4 financial institutions and raised its assessment of credit profiles of 4 banks. Bajaj Fincorp, Hero Fincorp, Shriram Finance & Union Bank of India were upgraded by 1 notch each. Standalone credit profiles of HDFC Bank, ICICI Bank & SBI were raised by 1 notch each.

S&P said it expected India’s financial institutions, especially public sector banks to sustain their improvement in capital positions. It sees net credit costs, , an indicator of costs attached to bad loans remain at about 1.2% over the next few years with new bad loans seen at cyclical lows over the two next financial years. In another fresh development, the RBI current account deficit (CAD) narrowed shaply in Jan-March quarter, helped by smaller trade gap & increased services exports. Q4 Current Account deficit of 2022-23stood at $1.3 billion or 0.20% of GDP, compared to a previous quarter revised deficit of $16.8 billion or 2% of GDP (Q3). The Credit rating agencies outlook and CAD figure is in tune with RBI’s Governor’s statement earlier this month that despite 3 years of global turmoil, India’s growth has bounced back, and headline CPI inflation is easing and there is financial & external sector stability. But RBI’s primary target for inflation remained at 4%.

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