Vihar Vaishnav: S&P Global Ratings report said that strong domestic demand will play a major role in limiting the economic slowdown in economies like India. Along with this, the country’s low dependence on exports will also boost the growth of the economy.
“We expect India’s GDP growth rate to be 6.5 percent in FY 2025-26. This forecast takes into account normal monsoon, low crude oil prices, income tax relief and easing of monetary policy,” the report on the economies of the Asia-Pacific region said.
The report said that declining food inflation in India will help in keeping the core inflation low. India’s wholesale inflation fell to a 14-month low of 0.39 per cent in May from 0.85 per cent in April and 2.05 per cent in March.
At the same time, India’s retail inflation rate has declined to 2.82 percent in May, which was 4.8 percent in May last year. This was the lowest level of retail inflation since February 2019. The retail inflation rate was 3.16 percent in April this year.
The reason for the reduction in inflation is the food inflation coming down to 0.99 percent, which is the lowest level since October 2021. Food inflation rate has been continuously decreasing for the last seven months. The reason for this is the increase in agricultural production.
Last Friday, Reserve Bank of India Governor Sanjay Malhotra also lowered its inflation forecast for 2025-26 from 4 per cent to 3.7 per cent. “Taking into account all factors and assuming a normal monsoon, CPI inflation for FY 2025-26 is now projected at 3.7 per cent,” he said.
According to S&P Global Ratings, many regional economies have a good start to 2025 due to strong domestic demand. Many economies have also received a temporary boost from advance loading of exports to the US ahead of tariffs. The report said the Chinese economy is expected to grow by 4.3 percent GDP in 2025 and 4 percent in 2026.
According to the report, Asia-Pacific economies are facing considerable external pressure. We expect India’s domestic demand to remain broadly healthy.
