Fitch Ratings elevates India's GDP growth forecast amid rising workforce participation
- Fitch Ratings increased India's GDP growth potential to 6.4 percent over the next five years.
- The revision is based on a stronger rise in India's labor force participation rate and total employment.
- India remains the world's fastest-growing major economy despite global economic challenges.
India recently received an upward revision in its GDP growth potential from Fitch Ratings, a leading global ratings agency. Effective as of Thursday, May 22, 2025, Fitch announced that India's growth forecast has been increased by 0.2 percentage points to 6.4 percent over the next five years. This adjustment reflects a significant rise in the country’s labor force participation rate, which has shown a marked increase in recent years, suggesting a robust engagement of the populace in gainful employment. Fitch Ratings underscored that India's revised economic outlook is primarily driven by labor inputs rather than productivity gains. Specifically, the agency pointed out that total employment has contributed more significantly to growth expectations than improvements in productivity. The report stands in contrast to the downward adjustment in China’s growth projections, which have been lowered by 0.3 percentage points, reflecting a decrease in labor force participation and capital deepening within the Chinese economy. In this revised context, Fitch emphasized the importance of labor inputs. Total-factor productivity growth, essential for driving economic expansions, is projected to decelerate to its long-run average, indicating a shift in focus from productivity increases to employment growth as the principal driver of economic activity. Despite global challenges, India continues to stand as the fastest-growing major economy, with predictions that it will exceed 6 percent growth in the coming years. This optimistic outlook for India also stands in stark comparison to the recent International Monetary Fund (IMF) report, which has lowered growth forecasts for over 120 countries. Thus, India's ability to maintain high GDP growth rates showcases its unique resilience during times of global economic uncertainty. The agency's positive feedback also indicates a growing confidence in the Indian economy's ability to withstand external economic pressures, making it a focal point for investments and economic analysis moving forward.