S&P Global Ratings has projected India's GDP to grow consistently between 6 and 7.1% annually during the fiscal years of 2024-2026, indicating a positive and stable trajectory for the country's economic expansion. This forecast, outlined in S&P's report titled 'Global Banks Country-By-Country Outlook 2024,' highlights the nation's resilient growth prospects over the medium term.
The report emphasizes a positive outlook for India's banking sector, anticipating a decline in weak loans to 3-3.5% of gross advances by March 31, 2025. This expected improvement stems from structural enhancements within the banking system, including healthier corporate balance sheets, stricter underwriting standards, and more effective risk-management practices.
S&P notes that interest rates are not likely to witness substantial increases, thereby mitigating risks for the banking industry. While the growth of unsecured personal loans has been rapid, the report suggests that prudent underwriting standards for retail loans have been upheld, maintaining acceptable levels of delinquencies within this category.
Despite global uncertainties, the report indicates that their impact on the Indian economy is anticipated to be relatively limited. Factors such as slower global growth and external demand could potentially impact economic activity, leading to inflation. However, due to India's largely domestic orientation, the agency expects the nation's economic growth to remain resilient against these external pressures.
Moreover, India's real GDP witnessed a notable rise of 7.8% year-on-year in the June quarter, reflecting an increase from 6.1% in the preceding March quarter. The Reserve Bank of India's forecast of a 6.5% economic growth for the fiscal years 2023-24 and 2024-25 aligns with these positive growth projections.
While the State Bank of India and leading private-sector banks have made considerable strides in addressing their asset-quality challenges, public-sector banks still grapple with relatively higher volumes of weak assets. This disparity might result in increased credit losses and impact profitability, lagging behind the industry's overall performance, according to the report.