Photo used for representation purposes only. S&P expected the Reserve Bank of India to raise its already high policy rate further following a recent surprise on the upside in inflation. File | Photo credit: Sushil Kumar Verma

S&P Global Ratings on Monday kept its forecast for India’s economic growth unchanged at 6% for the fiscal year beginning April 1, before rising to 6.9% the following year.

In the quarterly economic update for Asia-Pacific, S&P saw the inflation rate drop to 5% in fiscal year 2023-24, from 6.8% in the current fiscal year.

It saw India’s Gross Domestic Product (GDP) likely increase by 7% in the current fiscal year ending March 31 (2022-23), before slowing to 6% in the next fiscal year 2023. -24.

“India is leading, with an average growth of 7% in 2024-2026,” the update said.

GDP is projected to grow to 6.9% in the next two fiscal years – 2024-25 and 2025-26 and grow to 7.1% in 2026-27.

“In India, domestic demand has traditionally dominated the economy. But it has become more responsive to the global cycle lately, partly due to rising commodity exports; and its year-on-year GDP growth has slowed. to 4.4% in the fourth quarter (October-December 2022),” the rating agency said.

Severe underlying inflation in India suggests little slack in those economies, he said.

S&P expected the Reserve Bank of India to raise its already high policy rate further following a recent surprise on the upside in inflation.

“In our view, India’s Consumer Price Index (CPI) inflation is expected to moderate to 5% in FY 2024 (ending March 2024), but we also expect upside risks, including weather-related factors,” he said.

Stating that the current account balances of energy-importing Asia-Pacific economies have deteriorated, the rating agency said that in India, the external deficit reached around 3-3.5% of GDP in 2022. .

S&P Global Ratings maintained “a cautiously optimistic outlook for Asia-Pacific”, saying China’s economy was on track to recover this year.

“We believe the recovery in China will be largely organic, driven by consumption and services. Our GDP growth forecast of 5.5% this year, compared to 4.8% in November, exceeds the target of about 5% announced at National People’s Congress meetings in March,” said S&P Global Ratings chief economist Louis Kuijs.

External pressure from rising US interest rates will likely drive interest rates higher. The United States and the Eurozone are expected to slow significantly in 2023.

“We expect only 0.7% growth in the United States this year and 0.3% in the euro zone,” S&P said.

“China’s recovery will not fully offset the impact of the slowdown in the United States and Europe on the Asia-Pacific region. But she will tone it down. The likely acceleration in China this year is broadly comparable to the likely slowdown in the US and Europe. .”