India’s GDP: India’s economy will grow at a rate of 6.5-7% by FY2027, know what else S&P said

Regarding the country’s economic growth rate, S&P Global Ratings on Thursday said in its forecast that India will grow at an annual growth rate of 6.5-7 percent in the three financial years till March 2027. The agency has said that spending on infrastructure and private consumption will boost the pace of growth. According to PTI news, in the Global Bank Outlook report, S&P also said that good economic growth prospects will continue to support the asset quality of banks, while healthy corporate balance sheets, strict underwriting standards, and better risk management practices will further stabilize asset quality.

Good economic prospects are expected.

The agency said structural reforms and good economic prospects will support the resilience of India’s financial institutions. For the current fiscal year, the Reserve Bank of India has projected economic growth at 7.2 percent, down from 8.2 percent in 2023-24. S&P Global said higher demand as well as strong bank capitalisation will boost bank loan growth, but deposit growth will moderate.

Weak loans in the banking sector will decrease.

The banking sector’s weak loans are expected to decline to about 3 percent of gross loans by March 31, 2025, compared with our estimate of 3.5 percent by March 31, 2024. This is due to healthy corporate balance sheets, stricter underwriting standards, and better risk management practices. Corporate borrowing has picked up, but capital expenditure-related growth may be delayed due to uncertain external conditions. Deposits may have difficulty sustaining the momentum, leading to a weakening loan-to-deposit ratio. Nevertheless, banks’ overall funding profile should remain strong.

Unsecured personal loans rise sharply.

Underwriting standards for retail loans in India are healthy, and defaults in this segment remain manageable. However, unsecured personal loans have grown rapidly and this could contribute to incremental non-performing loans (NPAs). The rating agency further said that RBI is becoming more vocal and imposing heavier penalties on banks as it focuses on technology, compliance, customer complaints, data privacy, governance, and know-your-customer issues.