Moody Forecasts Indian Economy To Grow At 6.6% In FY25

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Moody Forecasts Indian Economy To Grow At 6.6% In FY25: Moody’s Ratings predicts a 6.6% expansion for the Indian economy in the fiscal year ending March 2025 (FY25), supporting Non-Banking Financial Companies (NBFCs) despite rising funding costs.

Economic Growth Projection

Moody’s anticipates India’s GDP to grow by 6.6% in FY25, followed by a 6.2% growth in the subsequent year. While slightly lower than some estimates, this projection reflects Moody’s assessment of the economic landscape.

Impact on the NBFC Sector

Strong economic growth is expected to drive robust loan growth in the NBFC sector, mitigating the effects of increasing funding costs on profitability. Favorable economic conditions will help maintain asset quality amidst rising interest rates and customer debt burdens.

Loan Growth and Diversification

NBFCs witnessed a surge in aggregate loan growth to 20.8% year-on-year in September 2023, primarily driven by retail loan demand. Moody’s anticipates a continued growth trajectory of about 15% over the next 12-18 months, supported by diverse lending activities including infrastructure financing and SME support.

Challenges and Mitigation

While growth in unsecured retail loans may moderate following regulatory adjustments, NBFCs are expected to maintain their pivotal role in addressing credit needs across India’s economy. The top 20 NBFCs, with established market positions and diversified loan portfolios, are expected to navigate challenges with relative stability.

India’s Growth Prediction

Moody’s FY25 GDP growth predictions are slightly lower than some other estimates but align with Deloitte’s forecast. The Reserve Bank of India (RBI) projected a growth of 7 percent in the current fiscal year, while other agencies estimate growth rates ranging from 6.8% to 7%.

Moody’s Focus on NBFC

Moody’s rating projects growth of about 15% in NBFC loans over the next 12 to 18 months, driven by various lending activities including infrastructure financing and SME loans. NBFCs are expected to continue playing a significant role in meeting credit requirements across India’s economy.

Slowdown in Unsecured Retail Loans

Moody’s notes that growth in unsecured retail loans may slow following regulatory adjustments by the RBI. However, the top 20 NBFCs, known for their strong market positions and government or corporate ownership, are expected to maintain stability in funding even during stressful times.

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