Fitch Ratings has revised India's medium-term GDP growth potential upward to 6.4% over the next five years, citing a significant increase in labor force participation. This revision places India among the fastest-growing major economies globally, contrasting with downward adjustments in growth forecasts for other emerging markets.

Key Points:

Revised Growth Forecast: Fitch Ratings has increased India's medium-term GDP growth potential from 6.2% to 6.4% over the next five years, attributing this to a substantial rise in labor force participation.

Labor Force Dynamics: The upward revision reflects a stronger contribution from labor inputs, primarily total employment, rather than labor productivity. Fitch notes that India's labor force participation rate has increased sharply in recent years and is expected to continue rising, albeit at a slower pace. 

Global Comparison: In contrast, Fitch has downgraded China's medium-term growth forecast from 4.6% to 4.3%, citing weaker capital deepening and a steeper decline in labor force participation. This adjustment highlights a shifting economic dynamic between the two largest economies in Asia. 

Total Factor Productivity (TFP): Fitch anticipates that TFP growth in India will slow from recent years and revert to its long-term average of 1.5%. This adjustment reflects a more balanced outlook for productivity growth in the coming years. 

Emerging Market Trends: Fitch's updated assessment shows a marginal decline in the average potential growth for emerging markets, now estimated at 3.9%, down from 4% in the previous assessment. This reflects lower potential growth in China and other emerging economies.