With moderation in inflation, India will see higher consumer spending: Fitch Ratings

New Delhi: Putting an end to the debate on India’s growth based on the government’s capex push, global rating agency Fitch Ratings said that consumer spending will increase with elevated consumer confidence, a sign of enhanced income for people.

The credit rating agency in its June report of Global Economic Outlook (GEO) said that India will see higher Consumer spending with elevated consumer confidence. Expectations of better than expected monsoon will support growth and make inflation less volatile.

The rating agency has elevated India’s growth forecast by 20 basis point to 7.2 per cent for fiscal year 2024-25. Earlier in March Fitch has forecasted India’s growth at 7 per cent.

Backing its anticipation for consumer spending in coming quarters, the rating agency said, that average rainfall during June-September is likely to limit the inflationary risks from a food price spike, incentivising spending.

According to official forecasts in the country, the rainfall during June-September is likely to be above average.

The report forecasts headline inflation declines to 4.5 per cent by calendar year-end, and average inflation rests at 4.3 per cent in 2025 and 2026, staying slightly above the midpoint of RBI’s target of 4 per cent with a variation of 2 per cent.

Headline inflation is a measure of the total inflation within an economy, including the prices of commodities like food and energy.

India’s retail inflation rate softened marginally in May to 4.75 per cent, continuing its moderation trend, though food prices continue to remain a pain point.

In May, the annual retail inflation stood at a 12-month low of 4.75 per cent, marginally down from 4.83 per cent in April.

Core inflation shows a trend in the cost of goods and services, excluding food and energy has also fallen to 3.0 per cent in May but the country faced high food price inflation of an average of 7.8 per cent in the first five months of 2024.

In the final quarter of the financial year ending March 2024, real GDP increased by 7.8 per cent year on year. The real GDP of India grew at 8.2 per cent in FY2023-24. (ANI)


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