Moody's forecasts the Indian economy to grow at a rate of 6.6% in the fiscal year 2024-2025.

Summary –

The agency emphasized that the Non-BankingFinancial Company (NBFC) sector's profitability will be strengthened by robust credit demand, driven by strong economic growth.

On Tuesday, Moody's Ratings announced that the Indian economy is expected to grow by 6.6 percent in the ongoing fiscal year (FY25).

The agency emphasized that robust economic growth driving strong credit demand will enhance the profitability of the Non-Banking Financial Company (NBFC) sector.

Moody's Ratings, as quoted by PTI, anticipates India's economy to grow by 6.6 percent in the fiscal year ending March 2025 (FY25) and by 6.2 percent in the subsequent year. They suggest that this growth trajectory will drive strong loan expansion at NBFCs, counteracting the effects of increasing funding costs on their profitability.

The Indian economy is estimated to have grown by 8 percent in the fiscal year 2023-24.

Moody's analysis of non-banking finance companies underscores that favorable economic conditions will help maintain their asset quality, despite higher interest rates potentially increasing the debt burden for their clients.

"Although funding costs for non-bank finance companies (NBFCs) in India are increasing, the sector's profitability will be bolstered by strong credit demand fueled by the country's robust economic growth. Additionally, robust economic conditions will aid in maintaining their asset quality, despite interest rate hikes raising the debt burdens of their customers," it elaborated.

Aggregate year-on-year loan growth at NBFCs surged to 20.8 percent in September 2023 from 10.8 percent a year earlier, primarily propelled by the demand for retail loans such as housing and automobile financing.

Moody's Ratings anticipates NBFCs' loans to expand by approximately 15 percent in the next 12-18 months, propelled by diverse lending activities such as infrastructure financing by major government-owned NBFCs and loans extended to small and medium-sized enterprises.

"However, growth in unsecured retail loans is expected to decelerate following the Reserve Bank of India's (RBI) decision to increase the risk weight of such credit assets by 25 percentage points for both banks and NBFCs in December 2023," stated Moody's Ratings.

NBFCs will persist in playing a significant role in fulfilling credit requirements for individuals and businesses within India's expansive economy.

The top 20 NBFCs maintain robust market positions and possess extensive track records in offering specialized loans, ranging from housing finance to commercial vehicle financing.

The agency noted that most of these NBFCs are either government-owned or affiliated with large corporate groups, providing stability to their funding during challenging periods.

Moody's Ratings' GDP growth estimates for FY25 are slightly lower than those projected by the RBI and other agencies but align with Deloitte's forecast.

The RBI has forecasted the Indian economy to expand by 7 percent in the current fiscal year.

The Asian Development Bank (ADB) and Fitch Ratings have forecasted growth at 7 percent, while S&P Global Ratings and Morgan Stanley project a growth rate of 6.8 percent.

Deloitte India anticipates India's GDP to expand by 6.6 percent in the current fiscal year, buoyed by increased consumption expenditure, a rebound in exports, and capital inflows. However, they have expressed concerns regarding inflation and geopolitical uncertainties.

Disclaimer: The content of this article is for informational purposes only and does not constitute financial advice.

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Source - https://economictimes.indiatimes.com/news/economy/indicators/moodys-pegs-indias-fy25-gdp-growth-at-6-6-pc/articleshow/110123662.cms