India to remain fastest-growing major economy: S&P

World’s fifth largest economy is on track to grow 6.7% in 2024

Top Stories

Dubai: Sheikh Mohammed announces Dh30-billion rain drainage network

Paid parking in Dubai: Residents face up to Dh4,000 extra yearly costs when new rates kick in

UAE: Worker wins Dh1 million in National Bonds draw after saving Dh100 every month

A general view of the skyline in Mumbai, India's commercial capital. — Reuters file

Published: Mon 1 Jul 2024, 6:45 PM

Last updated: Mon 1 Jul 2024, 6:51 PM

India will remain the fastest-growing major economy in the world during the next three years while China and the US will be recording the second and third highest growth rates, according to &P Global Market Intelligence.

After growing at an exceptional rate of 8.1 per cent in 2023, India, the world’s fifth largest economy, is on track to grow 6.7 per cent in 2024, 6.3 per cent in 2025 and 6.1 per cent in 2026, while China will grow 5.0 per cent in 2024, 4.6 per cent in 2025, and 4.5 per cent in 2026, S&P said. The US economy, which grew 2.5 per cent in 2023 is on track to clock 2.4 per cent growth this year, and below 2.0 per cent in 2025 and 2026.

The World Bank retained its growth forecast for India at 6.6 per cent for FY25. “India will remain the fastest-growing of the world’s largest economies, although its pace of expansion is expected to moderate. After a high growth rate in FY 2023/24, steady growth of 6.7 per cent per year, on average, is projected for the three fiscal years beginning in FY 2024/25,” the multilateral bank said in its latest biannual Global Economic Prospects.

For FY26 and FY27, the World Bank projected India’s economy to grow at 6.7 per cent and 6.8 per cent, respectively. In FY24, the National Statistical Office has estimated gross domestic product to have grown at 8.2 per cent. The Reserve Bank of India (RBI) in its latest monetary policy review last week raised its growth projection to 7.2 per cent for FY25 from 7 per cent estimated earlier.

Fitch Ratings raised India’s growth forecast on Tuesday, citing recovery in consumer spending and increased investment. The agency has increased India’s growth forecast from 7 per cent projected in March to 7.2 per cent.

It has projected a growth rate of 6.5 for fiscal year 2025-26 and 6.2 per cent for 2026-27.

In its global economic outlook report, Fitch said, "We expect the Indian economy to expand by a strong 7.2 per cent in FY24/25 (an upward revision of 0.2 pp from the March GEO).”

It predicted investment to continue to rise but more slowly than in recent quarters. Consumer spending, it said, will recover with elevated consumer confidence. Purchasing managers survey data point to continued growth at the start of the current financial year, it said.

S&P Global Market Intelligence said the growth outlook for the Middle East and North Africa (Mena) region remains broadly unchanged, S&P said as it lowered its growth forecasts for 2024 for the US, Canada, Brazil, and Japan. The forecast for China, the eurozone, the UK, and Russia were revised upward. The 2025 global growth forecast has edged up from 2.7 per cent to 2.8 per cent, with forecasts for some of the larger countries revised higher, including the US and China.

Ken Wattret, global economist at S&P Global Market Intelligence said global economic conditions remain remarkably resilient in the face of escalating geopolitical uncertainties. “The moderation of inflation and related central bank policy easing remain key sources of support. Still, recent financial market jitters in France and Latin America could be a harbinger of more turbulent times ahead.”

Real GDP growth in the Middle East is forecast at 1.7 per cent and 2.8 per cent, respectively, in 2024 and 2025. Growth risks for the region continue to loom high as the war between Israel and Hamas has continued.

S&P Global Market Intelligence expects monetary policy easing to become more widespread while moderation in underlying price pressures continues to drive gradual downward trend in global consumer price inflation in 2024–26.

Monetary policy easing continues to become more widespread despite the US Federal Reserve’s inaction. It expects a further 25-basis point (bp) cuts in September and December by the European Central Bank and two further 25-bp cuts in Canada before year-end. “We continue to expect the Fed and Bank of England easing cycles to begin during the second half of the year, with rate cuts also forecast to become more widespread across emerging markets in tandem with Fed easing.”