Over the longer term, India’s economic development prospects remain strong, with GDP predicted to expand between 6% and 7.1 percent year from 2023-24 (FY24) to 2025-26.
Weak loans in the banking industry are expected to fall to 3-3.5% of total advances by the end of 2024-25 (FY25). This improvement can be ascribed to structural improvements like as strong corporate balance sheets, tighter underwriting criteria, and better risk-management techniques. Unsecured personal loans have expanded significantly, potentially contributing to an increase in non-performing loans. We believe that retail loan underwriting standards are typically healthy and that the overall level of delinquencies is within acceptable bounds for this product category. Given India’s domestic orientation, the credit rating agency anticipates that weaker global growth and external demand will have less of an impact on economic growth. The agency, however, warns that this could drive inflation.
Many public-sector banks continue to hold relatively significant amounts of risky assets, resulting in higher credit losses and worse profitability; their performance trails that of the industry.
A strong political mandate in support of reform measures, along with improved external demand, would propel faster growth. During the 2019-27 timeframe, the Indian economy has the ability to grow at a 6.2 percent annual average pace. This potential growth is mostly attributable to a higher employment rate and a more accurate prediction of the working-age population. This improved potential forecast for the Indian economy comes in the midst of a negative revision by the global credit rating agency of the medium-term growth potential for ten emerging nations to 4% from 4.3 percent previously predicted, mostly due to the impact of the Indian economy.