The global rating agency said the recent spike in vegetable price inflation was temporary, but revised upwards the full fiscal retail inflation forecast to 5.5%, from 5% earlier, on higher global oil prices.

“Growth this year will be weaker than in 2022, but our outlook remains broadly favourable.

Notwithstanding the strong expansion in India in the June quarter, we maintain our forecast for fiscal 2024 (ending March 2024), given the slowing world economy, the delayed effect of rate hikes, and the rising risk of subnormal monsoon,” the agency said in its Economic Outlook for Asia Pacific Q4 2023.

The finance ministry and the Reserve Bank of India expect economic growth to be around 6.5% in FY24 compared with 7.2% in FY23.

The Indian economy grew 7.8% in the April-June quarter of the current fiscal on strong services sector activity and robust demand.

Last week, the Asian Development Bank marginally lowered its economic growth forecast for India from 6.4% to 6.3% for the current financial year. However, ADB has retained its India forecast at 6.7% for 2024-25.

While retaining its growth forecast for the current fiscal at 6%, S&P also maintained that India’s economy will grow 6.9% in both 2024-25 and 2025-26.

S&P said India’s consumption growth as well as capital expenditure remained “strong” in the June quarter.

The agency has cut the 2023 growth forecast for China to 4.8%, from 5.2%, and that for 2024 to 4.4%, from 4.8%.

“While the rest of the region (Asia Pacific excluding China) is slowing on weaker global trade and higher interest rates, we slightly raised our forecast for 2023 growth to 3.9% amid domestic resilience.

Growth should rise to 4.3% in 2024 on better external demand and monetary policy easing,” it added.

FY24 VIEW

Slowing world economy, rising risk of subnormal monsoon and delayed effect of the interest rate hikes cited as key factors

Full fiscal retail inflation forecast raised to 5.5%, from 5% earlier, on higher oil prices

This story was featured in September 26, 2023 of Financial Express Mumbai

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