According to the latest Economic Outlook released by Crédito y Caución, India’s growth in 2024 will slow to 6.3% from 7.7% in 2023. India’s GDP growth is likely to pick up again in 2025 to 7.2%.
In the coming years, households are expected to shift more of their spending towards services, including travel and leisure, rather than physical goods. Even with rising interest rates, household credit expansion is expected to continue strongly in 2024 and 2025, indicating an increase in market confidence.
The credit insurer’s report forecasts inflation to moderate from 5.7% in 2023 to 4.7% in 2024 and 4.5% in 2025, above the 4% target set by its central bank. No rate cut in India is expected before the third quarter of 2024, and a gradual normalisation of monetary policy settings is to be expected.
Investment, the main driver of growth in 2023, will cool down due to weaker momentum in public capital spending, while the private investment cycle is likely to pick up only gradually. Public infrastructure spending has been one of the main drivers of investment in recent years, but its support is set to diminish due to fiscal prudence.
While the conditions are in place for a broader revival of the private investment cycle, the report expects the upturn to be gradual, as financing conditions are likely to remain tight for longer and demand prospects are uncertain.
Still high interest rates limit the recovery of private investment in 2024 and 2025. The expected moderation in external demand will dampen goods export growth in 2024, but certain segments, such as pharmaceuticals, will perform well. Overall, export growth will increase in both 2024 and 2025.
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