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

The ratings agency expects policy continuity after the general election.

New Delhi: Global ratings agency Moody's on Monday sharply raised India's GDP growth forecast for 2024 calendar year to 6.8% from its earlier projection of 6.1%, citing 'stronger-than-expected' data for 2023 and fading global economic headwinds.

“We believe that with global headwinds fading, the Indian economy should be able to comfortably register 6-7% real GDP growth and we therefore forecast around 6.8% growth in calendar year 2024, followed by 6.4% in 2025,” Moody’s said in its Global Macroeconomic Outlook for 2024.

This comes after the government data showed a robust 8.4% expansion recorded in the October-December quarter. The official GDP growth estimate for financial year 2023-24 (ending March 31, 2024) has been raised to 7.6% from 7.3%

According to Moody’s, the strong growth momentum of the October-December quarter likely carried into the January-March quarter. The rating agency listed robust revenue collections from goods and services tax (GST), auto sales, consumer optimism, double-digit credit growth, resilient urban consumption, expanding manufacturing and services PMIs as drivers of the solid economic momentum.

“Capital spending by the government and strong manufacturing activity have meaningfully contributed to the robust growth outcomes in 2023. We expect policy continuity after the general election and continued focus on infrastructure development,” Moody’s said.

For the financial year beginning April 1, the Reserve Bank of India (RBI) has pegged the GDP growth at 7% while the International Monetary Fund’s forecast stands at 6.7%.

Moody's has pegged India’s retail inflation at 5.2% for 2024 and 4.8% for 2025.

“Given the solid growth dynamics and inflation above the 4% target, we do not expect policy easing any time soon," it said. The RBI has not changed its key policy interest rates since February 2023.

The New York-headquartered rating agency noted that the year 2024 is an election year for several G20 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 reorganising supply chains and capital sources," Moody’s said.

It further noted that geopolitical realities will be influencing international trade flows, capital flows, international migration trends and international organizations in the years to come.