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Despite the potential impacts of slowing global trade and a recent 250 basis points monetary tightening by the Reserve Bank of India (RBI), the Indian economy shows resilience due to increased capital expenditure by the government, moderate commodity prices, and robust credit growth.
The improved forecast places India amongst the world’s fastest-growing economies. The Indian economy also reaps benefits from high bank credit growth and continued infrastructure spending. Fitch noted the optimism of households regarding future earnings and employment, which is expected to support consumer spending.
While inflation has eased in recent months, Fitch highlighted potential risks associated with the monsoon season and the potential impact of El Nino in the second half of the year. In May, India’s retail inflation softened to 4.25 per cent, comfortably fitting within the RBI's 2-6 per cent inflation target range.
Furthermore, with growth expected to slow and inflationary pressures easing, Fitch anticipates the RBI to halt its rate cycle before potentially decreasing early next year, shifting from its previous prediction of a 25 basis points increase to 6.75 per cent.
Fibre2Fashion News Desk (NB)