'Growth rate will be 6.5 percent in the next financial year', claims rating agency Moody's

Rating agency Moody's announced on Wednesday that the country's growth rate will accelerate at a 6.5 percent rate in the next financial year. The Indian economy will grow at a 6.3 percent rate in the current financial year. Higher government capital expenditure, the increase in consumer demand after tax cuts, and the decline in interest rates can drive the growth rate.

Moody's forecast a stable outlook for the banking sector and expressed the view that the operating environment for Indian banks will remain favorable next financial year but after the improvement witnessed during the last few years, their asset quality will decrease marginally and there will be some strain on unsecured consumer loans, microfinance loans, and small and medium enterprise (SME) loans. The banks will be operating in the profit mode as the decline in net interest margin (NIM) will be marginal with minor reductions in interest rates.

Moody's said that after a temporary slowdown in mid-2024, India's economic growth is expected to accelerate again and will be one of the fastest rates among large economies globally. Moody's Ratings said, 'Government capital expenditure, tax cuts for middle-class income groups to boost consumption and monetary easing will keep India's real GDP growth above 6.5 percent in FY 2025-26. It is estimated to be 6.3 percent in the current financial year. '

It is worth noting that the Finance Ministry's Economic Review has estimated the GDP growth rate for the next financial year to be 6.3-6.8 percent. According to official estimates, the GDP growth rate will be 6.5 percent in the current financial year. The country's real GDP growth rate slowed to 5.6 percent in the July-September 2024 quarter, rising to 6.2 percent in the next quarter.

Moody's expects India's average inflation rate to fall to 4.5 percent in FY 2025-26 from 4.8 percent last year. The Reserve Bank of India (RBI) increased its policy rate by 2.50 percent from May, 2022 to February, 2023 to control inflation, which has gradually increased interest rates for borrowers. The RBI reduced its policy rate by 0.25 percent to 6.25 percent in February, 2025.