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Moody’s upgrades India’s 2024 growth projection to 6.8%        

The improved projection comes on the back of ‘stronger-than-expected’ economic data of 2023 and fading global economic headwinds

Moody’s upgrades India’s 2024 growth projection to 6.8%        

Global ratings agency Moody’s has boosted its prediction for India’s gross domestic product (GDP) growth in 2024 to 6.8% from the earlier forecast of 6.1%. 

The improved projection comes on the back of ‘stronger-than-expected’ economic data of 2023 and fading global economic headwinds.

“India’s economy has performed well and stronger-than-expected data in 2023 has caused us to raise our 2024 growth estimate to 6.8% from 6.1%,” Moody’s said in its Global Macro Outlook 2024-25. 

India’s real GDP expanded to 8.4% year on year in the fourth quarter of calendar year 2023, resulting in 7.7% growth for full year 2023.

“Capital spending by the government and strong manufacturing activity have meaningfully contributed to the robust growth outcomes in 2023,” the global rating agency said.

India is likely to remain the fastest growing among G20 economies over the forecast horizon, the rating agency said, adding that, with global headwinds fading, the Indian economy should be able register 6.4% GDP growth in 2025.

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,” Moody’s data showed.

In its outlook released on Monday, the ratings agency said that the Reserve Bank of India (RBI) is likely to keep rates on hold in the coming months given strong growth and firm inflation. 

The RBI held the repo rate steady at 6.5% in February—the same level since March 2023.

Given the solid growth dynamics and inflation above the 4.0% target, Moody’s said it does not expect policy easing any time soon.

Headline inflation in January eased to 5.1% from 5.7% in the month prior. Core inflation also moderated to 3.5%, down from 3.8% in December. 

Moody’s also sees growth of G20 economies stabilizing at modestly lower levels in 2024. 

 “G20 economies will collectively expand by 2.4% in 2024 and 2.6% in 2025, down from 2.9% in 2023. The G20 advanced economies will slow from 1.8% in 2023 to 1.5% in 2024 and 1.6% in 2025. We estimate growth of the G20 emerging market countries at 3.8% this year and 3.9% in 2025, after 4.7% in 2023. The only economy likely to contract this year is Argentina,” the rating agency said.

India’s statistics ministry also raised its GDP growth estimate for FY24 to 7.6% in its second revised estimate, up from 7.3% in its earlier forecast.

RBI’s growth estimate for FY24 is 7%, while the international monetary fund (IMF) forecast for the Indian economy is 6.7%.

Moody’s said that 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 G20 countries including India and Implications of elections can go beyond borders and economic and public policy in today’s increasingly fractious world. 

“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,” it said.

ABOUT THE AUTHOR

Javaid Naikoo is a senior correspondent at Press Insider. A seasoned and analytical journalist, Javaid covers economy and policy from New Delhi. He has reported on politics, business and social issues in the past, and also has a keen interest in photojournalism. His compelling words and art have appeared across domestic and global publications. More

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