New Delhi: India remains among the best-performing economies in the world, and “we expect growth dynamics to continue in the medium term”, with GDP increasing 6.8 per cent annually over the next three years, S&P Global said on Thursday.
India is prioritising fiscal consolidation, demonstrating the government’s political commitment to deliver sustainable public finances, while maintaining its strong infrastructure drive.
“We forecast India’s real GDP growth at 6.5 per cent this year, which compares favourably with emerging market peers amid a broad global slowdown,” the global ratings agency said in a note.
“Robust economic expansion is having a constructive effect on India’s credit metrics, and we expect sound economic fundamentals to underpin growth momentum over the next two to three years. In addition, monetary policy settings have become increasingly conducive to managing inflationary expectations,” it noted.
The quality of government spending has improved in the past five to six years. The current administration has increasingly shifted budget allocation to infrastructure spending. Capital expenditure (capex) of the Union government is scheduled to increase to Indian rupees (INR) 11.2 trillion, or about 3.1 per cent of GDP, in fiscal 2026, it said.
This is up from the 2 per cent of GDP from a decade before. Adding capital spending by states, total public investment in infrastructure is estimated at around 5.5 per cent of GDP, which is on par or higher than sovereign peers.
“We believe the improvements in infrastructure and connectivity in India will remove chokepoints, which are hindering long-term economic growth,” said the global ratings agency.
Monetary policy reform to switch to inflation targeting has reaped dividends. Inflationary expectations are better anchored than they were a decade ago. Between 2008 and 2014, India’s inflation reached double-digits on numerous occasions.
In the past three years, despite volatility in global energy prices and supply-side shocks, CPI growth averaged 5.5 per cent. In recent months, it stayed at the lower bound of the Reserve Bank of India’s (RBI) target range of 2 per cent-6 per cent.
These developments, coupled with a deep domestic capital market, reflect a more stable and supportive environment for monetary settings.
(IANS)
