S&P Global Ratings said on Monday that India's economic growth would be unchanged at 6 per cent in the fiscal year starting April 1, before increasing to 6.9 per cent in the following year.
In the quarterly economic update for Asia-Pacific, S&P saw the inflation rate easing to 5 per cent in 2023 -- 24 fiscal year, from 6.8 per cent in the current financial year.
India leads the world, with an average growth of 7 per cent in 2024 -- 2026, according to the update.
In the following two years, GDP is projected to rise to 6.9 per cent -- 2024 -- 25 and 2025 -- 26 and rise to 7.1 per cent in 2026 -- 27.
The rating agency said that the global cycle has become more sensitive due to rising commodity exports and its year-on-year GDP growth has slowed to 4.4 per cent in the fourth quarter of October-December 2022, a factor that has made it more sensitive to the global cycle.
It said there was little slack in these economies because of the pronounced core inflation in India.
S&P expected the Reserve Bank of India to raise its already high policy rate after a recent upside surprise to inflation.
In the fiscal year 2024, India's Consumer Price Index CPI inflation will moderate to 5 per cent, but we also anticipate upside risks, including from weather-related factors, it said.
The rating agency said in India, the external deficit reached 3 -- 3.5 per cent of GDP in 2022 and that the current account balances of energy-importing economies in the Asia-Pacific have deteriorated.
S&P Global Ratings maintained a cautiously optimistic outlook for Asia-Pacific, saying China's economy is on track to recover this year.
The recovery in China will be largely organic, led by consumption and services. The GDP growth forecast of 5.5 per cent this year, up from 4.8 per cent in November, surpasses the 5 per cent target of 5 per cent announced at the National People's Congress meetings in March, said Louis Kuijs, S&P Global Ratings chief economist.
Interest rates are likely to be lifted by rising US interest rates. The US and the eurozone are likely to slow down in 2023.
We expect only 0.7 per cent growth in the US this year and 0.3 per cent in the eurozone, according to S&P.
The recovery won't fully offset the effects of the slowdown in the US and Europe on the Asia-Pacific region, because of China's recovery. The likely acceleration in China this year is similar to the slowdown in the US and Europe.