Fitch Ratings has said that India will see higher consumer spending as inflation moderates, resulting in elevated consumer confidence.
The credit rating agency in its June report Global Economic Outlook (GEO) report said that expectations of a better than expected monsoon will support growth and make inflation less volatile.
Fitch has revised India’s growth forecast upward by 20 basis points to 7.2 percent for fiscal year 2024-25, compared to their earlier forecast of 7 percent in March.
Fitch said that average rainfall during June-September is likely to limit the inflationary risks from a food price spike, thereby incentivising spending.
According to official forecasts, the rainfall during June-September is likely to be above average.
The Fitch report predicts that headline inflation will decline to 4.5 per cent by calendar year-end, with average inflation projected at 4.3 percent for 2025 and 2026, slightly above the midpoint of RBI’s target of 4 per cent with a variation of 2 per cent.
India’s retail inflation rate eased slightly to 4.75 percent in May, continuing its downward trend, although food prices remain a persistent concern.
Core inflation, which tracks the cost of goods and services excluding food and energy, fell to 3 percent in May. However, India experienced high food price inflation, averaging 7.8 percent in the first five months of 2024.
In the fourth quarter of the financial year ending March 2024, real GDP increased by 7.8 percent year-on-year. For the full fiscal year 2023-24, India’s real GDP grew at 8.2 percent.
(With ANI input)