Fitch Ratings on Tuesday raised India’s growth forecast for the current fiscal to 7.2 per cent, from 7 per cent projected in March, saying elevated consumer confidence will drive spending, besides increased investments.

In June update to its global economic outlook report, Fitch said it expects inflation to decline to 4.5 per cent by end of this year and RBI to cut policy interest rates by 25 basis points to 6.25 per cent.

“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),” Fitch said in its global economic outlook report.

Investment will continue to rise but more slowly than in recent quarters, while consumer spending will recover with elevated consumer confidence, it said.

For the fiscal years 2025-26 and 2026-27, Fitch projected growth rates of 6.5 per cent and 6.2 per cent, respectively.

Fitch’s estimates for FY25 are in line with that of RBI which earlier this month projected Indian economy to expand 7.2 per cent in the current fiscal on the back of improving rural demand and moderating inflation.

While the Asian Development Bank (ADB) estimates growth at 7 per cent, S&P Global Ratings and Morgan Stanley project growth rate of 6.8 per cent.

Moody’s Ratings and Deloitte India estimates India’s GDP to grow at 6.6 per cent in 2024-25 fiscal.

The Indian economy grew 8.2 per cent in the last fiscal (2023-24), with a 7.8 per cent expansion in March quarter.

Fitch said purchasing managers survey data point to continued growth at the start of the current financial year.

It said signs of the coming monsoon season being more normal should support growth and make inflation less volatile, though a recent heatwave poses a risk.

“We expect growth in later years to slow and approach our medium-term trend estimate,” it said, adding growth will be driven by consumer spending and investment.

Consumer price inflation has only edged down since the start of the calendar year, with annual inflation at 4.7 per cent in May from 5.7 per cent in December 2023.

According to official forecasts, rainfall during June-September is likely to be above average, Fitch said, adding this should limit the inflationary risks from food price spikes.

“We expect headline inflation to continue declining to 4.5 per cent by calendar year-end, and average 4.3 per cent in 2025 and 2026, staying slightly above the midpoint of its target range (4 per cent+/- 2 per cent),” Fitch said.

As per government data, retail inflation in May eased to 1-year low of 4.75 per cent.