Moody's Raises India's Growth Forecast For 2024 To 6.8%

NEW DELHI: Global rating agency Moody's on Monday raised India's growth forecast for 2024 calendar year to 6.8 per cent on "stronger-thanexpected" economic data and said that the country will remain the fastest growing among G20 countries.

In its Global Macroeconomic Outlook for 2024, Moody's Investors Service said with global headwinds fading, the Indian economy should be able to register 6-7 per cent real GDP growth comfortably. For 2025, the GDP growth is estimated at 6.4 per cent. Moody's had projected a 6.1 per cent growth for 2024 earlier.

"India's economy has performed well and strongerthan-expected data in 2023 has caused us to raise our 2024 growth estimate to 6.8 per cent from 6.1 per cent. India is likely to remain the fastest-growing among G-20 economies over our forecast horizon," Moody's said.

India's real GDP expanded by 8.4 per cent year-on-year in the fourth quarter of calendar year 2023, resulting in a 7.7 per cent growth for fullyear 2023. The GDP grew by 8.2 per cent in the April-June quarter and by 8.1 per cent in the July-September quarter.

Capital spending by the government and strong manufacturing activity have meaningfully contributed to the robust growth outcomes in 2023, Moody's said in its report.

The agency said high-frequency indicators show that the economy's strong September and December quarter momentum carried into the March quarter of 2024.

"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," Moody's said.

This year's interim budget targets capital expenditure allocation of Rs 11.1 lakh crore or 3.4 per cent of GDP in 2024-25 (fiscal year 2025), 16.9 per cent above the 202324 estimates.

"We expect policy continuity after the general election and continued focus on infrastructure development," Moody's said.

The agency said while private industrial capital spending has been slow to pick up, it is expected to pick up with ongoing supply chain diversification benefits and investors' response to the government's Production Linked Incentive scheme to boost key targeted manufacturing industries.

The year 2024 is an election year for several G-20 countries, including India, Indonesia, Mexico, South Africa, the UK and the US.

Implications of elections can go beyond borders and economic and public policy in today's increasingly fractious world, it said.

"Leaders elected this year will influence domestic and foreign policies for the next four to five years. Businesses are accordingly responding to evolving geopolitical dynamics by reorganizing supply chains and capital sources," Moody's said.

Headline inflation in January eased to 5.1 per cent from 5.7 per cent in the previous month.

Core inflation also moderated to 3.5 per cent, down from 3.8 per cent in December.

The RBI held the repo rate steady at 6.5 per cent in February the same level since March 2023. Given the solid growth dynamics and inflation above the 4 per cent target, we do not expect policy easing any time soon.

"The Reserve Bank of India (RBI) kept its policy rate on hold at its February meeting. The RBI will likely keep rates on hold in the coming months given strong growth and firm inflation," Moody's said.

It said geopolitical realities will be influencing international trade flows, capital flows, international migration trends and international organizations in the years to come. Domestically, industrial and trade policies of several countries are intertwined with foreign policy.

Moody's further said that the global economy is transitioning to a post-pandemic equilibrium with a steady normalization in economic activity across major advanced and emerging markets.

A soft landing appears within reach for several advanced economies because of effective policy manoeuvring, improved supply-demand balances and good fortune such as mild winters in Europe.

Moody's forecast G-20 economies will collectively expand by 2.4 per cent in 2024 and 2.6 per cent in 2025, down from 2.9 per cent in 2023.