S&P Global said in its latest report on Thursday that India’s economic growth prospects remain strong in the medium term, with GDP expected to grow between 6% and 7.1 percent annually in 2023-24 (FY24) through 2025-26.
“The economic growth momentum is expected to continue.” “Over the medium term, India’s economic growth prospects should remain strong, with GDP expanding 6-7.1 percent annually in 2024-2026,” S&P said.
According to the global credit rating agency’s report, bad loans in the banking sector will likely fall to 3-3.5 percent of gross advances by the end of fiscal year 2024-25 (FY25). This improvement can be attributed to structural improvements such as strong corporate balance sheets, tighter underwriting standards, and better risk-management practices.
Furthermore, the report stated that interest rates in India are unlikely to rise significantly, thereby limiting the risk to the banking industry. The Indian economy is expected to be less affected by global uncertainties.
“Unsecured personal loans have expanded rapidly and may contribute to additional non-performing loans.” “We believe retail loan underwriting standards are generally healthy, and the overall level of delinquencies is within acceptable limits for this product category,” said S&P Primary Credit Analyst Deepali Seth Chhabria.
Given India’s domestic orientation, the credit rating agency anticipates that slower global growth and external demand will have less of an impact on economic growth. The agency, however, warns that this could fuel inflation.
According to the report, the State Bank of India and the leading private-sector banks have largely addressed their asset-quality issues.
“Many public-sector banks still carry relatively high volumes of weak assets, which will result in higher credit losses and hit profitability; their performance lags that of the industry’s,” according to the report.
Morgan Stanley forecasted the Indian economy to grow at a rate of around 6.5 percent in FY24 and FY25, citing strong domestic fundamentals. Domestic demand is being supported by strong corporate and financial sector balance sheets, as well as the implementation of policy reform measures in the face of a global slowdown. Any unexpected outcome in the upcoming general elections, on the other hand, could have implications for growth and macroeconomic stability.
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