S&P Global Ratings on Monday raised India’s gross domestic product (GDP) growth forecast to 6.4% from 6% earlier as robust domestic demand offsets headwinds from inflation and weak exports.

"We have revised up our projection for India's GDP growth for fiscal 2024 (ending in March 2024) to 6.4%, from 6%, as robust domestic momentum seems to have offset headwinds from high food inflation and weak exports," the rating agency says.

S&P Global Ratings, however, expects 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%, from 6.9%," it says.

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, according to S&P Global. "Still, headline inflation remains above the Reserve Bank of India's (RBI) target of 4%, suggesting it will be a while before the rate cycle turns," it says.

India's retail inflation fell to a five-month low of 4.9% in October from an average of 6.7% in 2022-23 and 7.1% in July-August 2023. "We are not out of the woods yet and have miles to go, but readings of around 5 per cent and 4.9 per cent in September and October, respectively, are a welcome relief from the average of 6.7 per cent in 2022-23 and 7.1 per cent in July-August 2023," the Reserve Bank of India said in its November bulletin.

India's manufacturing Purchasing Managers' Index (PMI) for October hit the lowest in eight months as demand for certain types of products faded. The seasonally adjusted S&P Global India Manufacturing Purchasing Managers' Index (PMI) stood at 55.5 in October, down from 57.5 in September, signalling the slowest rate of expansion since February. While India's manufacturing gauge eased, at above 55 it remained strong, says S&P Global.

Deloitte, too, raised India's GDP growth forecast in the range of 6.5% to 6.8% primarily due to festive spending in the coming months followed by higher government spending before the upcoming general elections mid-next year. The audit and consulting firm revised its growth forecast for India from July 2023 when it said India is likely to grow between 6% and 6.3% in FY24.

According to IMF estimates, India will emerge as the world's third-largest economy by 2027, hopping over Japan and Germany, as its GDP crosses $5 trillion dollars. By 2047, India aspires to be a developed economy.

India's GDP growth forecast

S&P Global hikes India's GDP growth forecast to 6.4% for FY24