Moody's raises India's 2024 growth forecast to 6.8%

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Moody Raises India Growth Forecast to 6.8% for 2024 - Citing Strong Economic Data

Team Finance Saathi

04/Mar/2024

Discover why Moody's has upgraded India's growth forecast for 2024 to 6.8%, highlighting robust economic performance and fading global headwinds.

Moody's, the global rating agency, has revised India's growth projection for the calendar year 2024 upward to 6.8%, from the earlier estimate of 6.1%, attributing the adjustment to the country's impressive economic performance in 2023 and diminishing global economic challenges.

In the fourth quarter of calendar year 2023, India's real GDP expanded by 8.4% year-over-year, contributing to a full-year growth of 7.7% for 2023. Moody's credits this remarkable growth to substantial government capital spending and robust manufacturing activity throughout the year.

With the waning of global economic headwinds, Moody's anticipates that the Indian economy will comfortably sustain a real GDP growth rate between 6-7%. India's economy is poised to remain the fastest-growing among G20 economies in the foreseeable future, according to Moody's Global Macroeconomic Outlook for 2024. Additionally, the GDP growth forecast for 2025 stands at 6.4%.

High-frequency indicators suggest that the strong momentum witnessed in the September and December quarters of 2023 has carried over into the March quarter of 2024. Encouraging signs such as robust goods and services tax collections, increasing auto sales, consumer optimism, and double-digit credit growth indicate the resilience of urban consumption demand. Moreover, expanding manufacturing and services PMIs provide further evidence of solid economic momentum.

Looking ahead, India's interim Budget for 2024-25 targets a capital expenditure allocation of ₹11.1 lakh crore, representing 3.4% of GDP, a significant increase over the previous year's estimates. Moody's anticipates policy continuity post-general elections and continued emphasis on infrastructure development, supporting sustained economic growth.

Although private industrial capital spending has been sluggish, Moody's expects a pickup fueled by ongoing supply chain diversification benefits and investor response to the government's Production Linked Incentive scheme aimed at boosting key manufacturing industries.

Furthermore, Moody's notes that the year 2024 is an election year for several G20 countries, including India, with implications for domestic and foreign policies. The agency emphasizes the significance of leadership changes in shaping economic and public policies, prompting businesses to adapt to evolving geopolitical dynamics by restructuring supply chains and capital sources.

In conclusion, Moody's underscores the influence of geopolitical realities on international trade, capital flows, migration trends, and policy frameworks, emphasizing the interconnectedness of industrial and trade policies with foreign policy objectives.

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Moody Raises India Growth Forecast to 6.8% for 2024 - Citing Strong Economic Data

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