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  3. Moody's Ratings projects India’s economy to expand 6.6% in FY25

Moody's Ratings projects India’s economy to expand 6.6% in FY25

15 May 2024 Evaluate

Expressing optimism over India’s economic growth prospects, Moody's Ratings has projected that the country’s economy to expand 6.6 per cent in the current fiscal year (FY25) and 6.2 per cent the following year and said strong credit demand fuelled by robust economic growth will support the non-bank finance companies (NBFCs) profitability. The Indian economy is estimated to have expanded 8 per cent in the 2023-24 fiscal year.

On the NBFCs, Moody's said robust economic conditions will help them preserve their asset quality even as rise in interest rates increase the debt burdens of their customers. It said ‘Funding costs for non-bank finance companies (NBFCs) in India are rising, but strong credit demand fuelled by country's robust economic growth will support the sector's profitability. Also, robust economic conditions will help them preserve their asset quality even as rises in interest rates increase the debt burdens of their customers’.

Aggregate year-on-year loan growth at NBFCs accelerated to 20.8 per cent in September 2023 from 10.8 per cent a year earlier, driven by demand for retail loans, including financing for housing and automobiles. Moody's Ratings expects loans at NBFCs to grow about 15 per cent in the next 12-18 months, driven by various types of lending, including infrastructure financing by large government-owned NBFCs and loans to small and medium-sized enterprises.

It said ‘Growth in unsecured retail loans will slow after the Reserve Bank of India (RBI) raised the risk weight of such credit assets for both banks and NBFCs by 25 percentage points in December 2023’. NBFCs will continue to play an important role in meeting credit needs among individuals and businesses in India's vast economy. The largest 20 NBFCs have strong market positions and long histories of providing specific types of loans, such as financing for housing or commercial vehicles. Also, most of them are owned by the government or by large corporate groups, which would lend stability to their funding in times of stress.

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