Moody’s Ratings forecasts a 6.6% expansion in the Indian economy for the fiscal year ending March 2025, with an anticipated growth of 6.2% in the subsequent year. This prediction, slightly lower than the Reserve Bank of India’s (RBI) and other agencies’, aligns closely with Deloitte’s forecast. The rating agency attributes this growth to strong credit demand, buoyed by robust economic conditions, which is expected to bolster the profitability of non-bank finance companies (NBFCs).
The Indian economy, having likely grown by 8% in the fiscal year 2023-24, faces rising funding costs for NBFCs. However, Moody’s anticipates that the sector’s profitability will be supported by the vigorous credit demand fueled by India’s economic robustness. Additionally, the agency suggests that favorable economic conditions will aid in maintaining asset quality for NBFCs despite potential challenges posed by increasing interest rates on customer debt.
Contrary to the RBI’s projection of 7% growth for the current fiscal year, Moody’s anticipates a slightly lower rate. Other agencies such as the Asian Development Bank (ADB) and Fitch Ratings have estimated growth at 7%, while S&P Global Ratings and Morgan Stanley expect a rate of 6.8%. Deloitte India, however, forecasts a 6.6% growth, driven by consumption expenditure, exports, and capital flows, despite concerns regarding inflation and geopolitical uncertainties.
Moody’s Ratings projects a notable 15% growth in loans at NBFCs over the next 12 to 18 months, driven by various lending activities including infrastructure financing by government-owned NBFCs and loans to small and medium-sized enterprises. Emphasizing the continued significance of NBFCs in catering to India’s extensive credit needs, the agency notes a slowdown in growth for unsecured retail loans following regulatory adjustments by the RBI in December 2023.
Furthermore, Moody’s highlights the stability provided to the top 20 NBFCs, primarily government-owned or backed by large corporate groups, during challenging times. Their strong market positions and specialized lending focus, such as housing or commercial vehicle financing, are expected to ensure stable funding amidst market uncertainties.
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