Moody's raises India's GDP growth forecast for 2024 to 6.8% from 6.1%

India GDP growth: Moody's Ratings on Monday, March 4, increased India's GDP growth forecast for 2024 to 6.8 per cent from 6.1 per cent earlier. Further, the ratings agency said that it has pegged the GDP growth projection for 2025 at 6.4 per cent.

The global rating agency further said India will continue to remain the fastest-growing economy among G20 nations. G20 economies, collectively, are anticipated to experience modest growth of 2.4 per cent in 2024 and 2.6 per cent in 2025, a slight decline from the 2.9 per cent growth recorded in 2023.

Advanced economies (Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, and Turkey) within the G20 are expected to witness a slowdown from 1.8 per cent in 2023 to 1.5 per cent in 2024 and 1.6 per cent in 2025, Moody's added.

Emerging market countries within the G20 are projected to grow at a rate of 3.8 per cent in 2024 and 3.9 per cent in 2025, following a 4.7 per cent growth in 2023. 

Furthermore, Moody's estimates the Consumer Price Index (CPI) for India, the average change in prices paid by consumers over a period of time for goods and services, at 5.2 per cent in 2024 and 4.8 per cent in 2025. 

While private industrial capital spending has been slow to pick up, it is expected to gain pace with ongoing supply chain diversification benefits and investors' responses to the government's production-linked incentive scheme to boost key targeted manufacturing industries.

Additionally, rising capacity utilisation, robust credit growth, and upbeat business sentiment point to an improving outlook for private investment.

Data from the Reserve Bank of India (RBI) indicates a 23 per cent increase in the total cost of private corporate projects sanctioned by major banks and financial institutions, suggesting a resurgence in private capex.

High-frequency indicators show that the economy's strong Q3 and Q4 momentum carried into the first quarter of this year. Robust goods and services tax collections, rising auto sales, consumer optimism, and double-digit credit growth suggest urban consumption demand remains resilient. On the supply side, expanding manufacturing and services PMIs add to evidence of solid economic momentum.

The interim budget for 2024–25 allocates a substantial Rs 11.1 trillion towards capital expenditure, reflecting a strategic focus on infrastructure development.

Moody's expects policy continuity post-general election and a sustained emphasis on bolstering infrastructure.

Robust indicators such as goods and services tax (GST) collections, rising auto sales, buoyant consumer sentiment, and double-digit credit growth underscore the resilience of urban consumption demand.

Furthermore, expanding manufacturing and services Purchasing Managers' Index (PMI) figures provide additional evidence of sustained economic vigour.

Inflationary pressures, however, have exhibited a mild moderation, with headline inflation easing to 5.1 per cent in January from 5.7 per cent in the preceding month.

Core inflation also witnessed a decline to 3.5 per cent from 3.8 per cent in December. Despite these trends, the RBI opted to maintain the repo rate at 6.5 per cent during its February meeting, a stance that has been consistent since March 2023.

Moody's suggests that given the robust growth dynamics and inflation hovering above the 4 per cent target, policy easing is unlikely in the near term.

Looking ahead, the Reserve Bank of India is expected to maintain its current policy stance in the upcoming months, balancing strong economic growth with inflationary concerns.

Last week, India released its GDP growth rate for the third quarter of the ongoing fiscal (Q3 FY24), which came in at 8.4 per cent, boosted by double-digit expansion in the manufacturing sector. The numbers were much better than most analysts' estimates, who had pegged the growth at 6.6 per cent.

In the previous quarter, the economy grew by 7.6 per cent while in the year-ago period, GDP growth stood at 4.3 per cent.

(With inputs from agencies.)

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