Moody’s Investors Service has maintained India’s 2023 economic growth forecast at 6.7% due to sustained domestic demand, asserting that the economy’s strong April-June quarter momentum carried into July-September.
“We expect India’s real GDP to grow about 6.7 % in 2023, 6.1% in 2024 and 6.3% in 2025,” Moody’s said in its Global Macroeconomic Outlook 2024-25.
With exports remaining on the lower side aligned with the unfavorable global economic backdrop, Moody’s said sustained domestic demand growth is boosting India’s economy.
India’s real GDP in the April-June quarter rose 7.8% compared to the previous year, bolstered by a 6% increase in household consumption and solid capital expenditure and service sector activity.
Moody’s said India’s growth momentum remains strong, and it expects the economy to grow 6.7% in 2023, as it did in 2022. The credit rating agency mentioned that high-frequency indicators show that the economy’s strong April-June quarter momentum carried into July-September.
“Robust goods and services tax collections, surging auto sales, rising consumer optimism, and double-digit credit growth suggest urban consumption demand will likely remain resilient amid the festive season,” it said.
It, however, mentioned that rural demand remains vulnerable to uneven monsoons that could lower crop yields and farm income.
On the supply side, the report said, the rise in manufacturing and services PMIS and healthy core industries’ output growth is evidence of solid economic momentum.
“Domestic demand dynamics beyond the festive season will depend on the trajectory of inflation and the lagged impact of the RBI’s monetary policy tightening,” it said.
Headline inflation in September eased to 5% from 6.8% in the month prior, dropping back within the RBI’s target range.
Although core inflation also moderated to 4.5%, from 4.8% in August, upside risks to headline CPI from potential spikes in food and energy prices amid erratic weather and geopolitical uncertainty will keep the RBI vigilant, Moody’s said.
The Reserve Bank of India (RBI) held the repo rate steady at 6.5% in its October monetary policy meeting.
Moody’s predicted that the global growth outlook will be slow in 2024 as high-interest rates percolate through credit channels to the real economy.
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