India’s GDP to grow 6.6% in FY25; will drive growth of NBFCs: Moody’s
However, Moody’s Ratings’ FY25 GDP growth estimates are lower than the RBI and other agencies’ forecasts, but on par with Deloitte’s forecasts.
Moody’s Ratings on Tuesday said the Indian economy is expected to grow 6.6 percent in the current fiscal and said strong credit demand, fueled by robust economic growth, will support the profitability of the NBFC sector.
“We expect the Indian economy to grow 6.6 percent in the year ending March 2025 (FY25) and 6.2 percent the following year. This will lead to robust credit growth among NBFCs, mitigating the impact of rising financing costs on their profitability.” This was reported by Moody’s Ratings.
The Indian economy is estimated to have grown by 8 percent in the fiscal year 2023-2024.
Commenting on non-bank finance companies, Moody’s said robust economic conditions will help them maintain the quality of their assets even as the rise in interest rates increases the debt burden of their customers.
“Funding costs for non-banking finance companies (NBFCs) in India are rising, but strong credit demand, fueled by the country’s robust economic growth, will support the sector’s profitability. Moreover, robust economic conditions will help them maintain the quality of their assets even as interest rates rise. interest rates increase their customers’ debt burden,” Moody’s said.
Total year-on-year loan growth among NBFCs accelerated to 20.8 percent in September 2023 from 10.8 percent a year earlier, driven by demand for retail loans, including home and auto financing.
Moody’s Ratings expects loans to NBFCs to grow by around 15 percent over the next 12 to 18 months, driven by various types of lending, including infrastructure financing by large government-owned NBFCs and loans to small and medium enterprises.
“Unsecured retail loan growth will slow after the Reserve Bank of India (RBI) increases the risk weight of such credit assets for both banks and NBFCs by 25 percentage points in December 2023,” Moody’s Ratings said.
NBFCs will continue to play an important role in meeting the credit needs of individuals and businesses across India’s vast economy.
The top 20 NBFCs have strong market positions and a long history of providing specific types of loans, such as home or commercial vehicle financing.
In addition, most of them are owned by the government or large business groups, which would give stability to their financing in times of stress, the agency said.
However, Moody’s Ratings’ FY25 GDP growth estimates are lower than the RBI and other agencies’ forecasts, but on par with Deloitte’s forecasts.
The RBI expects the Indian economy to grow by 7 percent in the current fiscal.
While the Asian Development Bank (ADB) and Fitch Ratings estimate growth at 7 percent, S&P Global Ratings and Morgan Stanley predict a growth rate of 6.8 percent.
Deloitte India estimates that India’s GDP will grow 6.6 percent this fiscal, helped by consumer spending, recovery in exports and capital flows, but also notes concerns about inflation and geopolitical uncertainties.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First print: May 14, 2024 | 8:52 PM IST