SME Futures Editorial
Indian economic growth outlook: India’s economy continues to be a standout performer on the global stage, with projections showing robust growth over the coming decade. Goldman Sachs has indicated that India is poised to remain one of the world’s fastest-growing economies until 2030, driven by strong GDP growth, investor confidence, and a resilient economy despite global uncertainties.
Stable earnings growth
Goldman Sachs notes that India’s economic resilience is evident in the stabilising earnings, with a mid-teen profit growth momentum expected to last through the decade. Over the past five years, Nifty’s total earnings growth and market capitalisation have shown an 18% compound annual growth rate (CAGR). The report forecasts a shift in the profit pool towards investment cyclicals such as autos, real estate, chemicals, and industrials, sectors expected to see a significant rise in profit share.
Optimistic growth projections for FY25
Alongside Goldman Sachs’ positive outlook, Moody’s Analytics projects India’s GDP to grow faster at 7.1% in FY25. The agency also maintained the country’s growth forecast at 6.5% for 2025, with a further rise to 6.6% in 2026. This continued growth is fuelled by stable consumer demand, improved supply chains, and a resilient economic environment.
Meanwhile, S&P Global Ratings has retained its growth forecast for India at 6.8% for the fiscal year 2024-25. However, the global rating agency notes that high interest rates could temper urban demand, as seen in the moderated growth during the June quarter of 2024. S&P expects growth to pick up again, forecasting 6.9% for FY 2025-26.
Inflation and RBI’s role
Inflation remains a key concern for the Reserve Bank of India (RBI), particularly food inflation, which could delay rate cuts. Despite a moderate inflation rate of 3.65% in August 2024, which is the second lowest in five years, the RBI is cautious about premature cuts. Moody’s Analytics revised India’s inflation forecast for FY25 down to 4.7% from 5%, suggesting better inflation outcomes in the near term. The RBI is expected to initiate rate cuts starting in October 2024, with two rate cuts anticipated within the fiscal year ending March 2025.
Global context and trade uncertainties
In the broader Asia Pacific region, Moody’s revised its 2025 growth forecast up to 4% from 3.9%, largely due to stronger export demand. However, the region faces challenges, including slowing demand for key exports like semiconductors and rising protectionism, especially due to China’s policy-led export surge.
India’s positive outlook amidst these global uncertainties showcases its ability to not only maintain stable growth but also adapt to evolving global market dynamics. The country’s long-term growth prospects make it an attractive destination for investors, reinforcing its role as a major player in the global economy.
