Fitch Ratings has raised India’s economic growth forecast, highlighting a recovery in consumer spending and increased investment.

The agency now projects India’s growth at 7.2% for the fiscal year, up from the 7% forecasted in March.

For the fiscal years 2025-26 and 2026-27, Fitch predicts growth rates of 6.5% and 6.2%, respectively. In its global economic outlook report, Fitch stated, “We expect the Indian economy to expand by a strong 7.2% in FY24/25, an upward revision of 0.2 percentage points from the March GEO.”

Fitch anticipates investment to continue rising, albeit at a slower pace than in recent quarters. Consumer spending is expected to recover, bolstered by elevated consumer confidence. The report also noted that purchasing managers’ survey data indicate ongoing growth at the start of the current financial year.

A normal monsoon season is expected to support growth and stabilize inflation, though Fitch expressed concerns about potential risks from recent heatwaves. The agency also forecasts that the Reserve Bank of India (RBI) will cut policy interest rates by 25 basis points this year, bringing them to 6.25%.

Fitch expects growth to moderate in subsequent years, aligning with its medium-term trend estimates, driven by consumer spending and investment. This projection aligns with the Reserve Bank of India’s forecast of 7.2% GDP growth for 2024-25. RBI Governor Shaktikanta Das has projected real GDP growth for 2024-25 at 7.3% for Q1, 7.2% for Q2, 7.3% for Q3, and 7.2% for Q4.

The Indian economy grew at 8.2% in fiscal 2023-24, with a 7.8% expansion in the March quarter.

Globally, Fitch has also raised its 2024 growth forecast to 2.6% from 2.4% and increased China’s growth outlook to 4.8% from 4.5%. However, for 2025, Fitch predicts global growth will slightly decrease to 2.4%, with US growth slowing to a below-trend rate of 1.5% and eurozone growth picking up to 1.5%. China’s growth is expected to fall to 4.5% as exports and government spending decelerate.