Fitch Raises India’s Growth Potential to 6.4% Through 2028

Fitch Ratings Elevates India’s Growth Potential to 6.4% Through 2028

May 22, 2025 — Fitch Ratings has revised India’s average annual growth potential upward to 6.4% for the period extending to 2028, an increase from the previous estimate of 6.2% made in November 2023. This adjustment reflects India’s stronger-than-anticipated economic rebound post-pandemic, indicating a less severe “scarring” effect than initially projected.

Key Factors Influencing the Upgrade

Fitch attributes the enhanced growth outlook to several pivotal factors:

• Robust Economic Recovery: India’s economy has demonstrated resilience, bouncing back more vigorously than expected after the pandemic-induced slowdown.
• Increased Labor Force Participation: A notable rise in labor force participation has contributed to the upward revision, suggesting a more dynamic workforce driving economic activity.
• Stable Total Factor Productivity (TFP): While TFP growth is anticipated to align with its long-term average of 1.5%, it remains a steady contributor to the overall economic potential.

Comparative Global Outlook

In contrast to India’s upgraded forecast, Fitch has adjusted its medium-term potential GDP projections downward for several other emerging markets. The GDP-weighted average growth for 10 emerging market economies is now projected at 3.9%, a slight decrease from the previous 4% estimate. Notably, China’s growth projection has been reduced to 4.3%, reflecting challenges such as property market adjustments and a declining labor force.

Implications for India’s Economic Trajectory

The revised growth potential underscores India’s position as a leading emerging market economy. The factors contributing to this outlook include:

• Demographic Dividend: India’s large and youthful population presents opportunities for sustained economic growth, provided that employment and skill development policies are effectively implemented.
• Infrastructure Development: Continued investment in infrastructure is expected to bolster economic activity and productivity.
• Policy Reforms: Ongoing economic reforms aimed at improving the business environment and attracting investment are likely to support growth momentum.

However, challenges such as high public debt levels and the need for fiscal consolidation remain pertinent. Fitch has previously noted that India’s debt-to-GDP ratio, standing at over 80%, poses constraints to a sovereign rating upgrade.