Moody's raises India's GDP growth forecast for 2024 to 6.8%
Moody's Investors Service has raised India's GDP growth forecast for 2024 to 6.8%, up from 6.1% predicted in November 2023, due to increased government capital spending and a thriving manufacturing sector. The ratings agency also adjusted its 2025 GDP growth projection to 6.4% from the previous 6.3%. Moody's reported that India's real GDP grew by 8.4% YoY in Q4 2023, leading to a full-year growth of 7.7%.
Inflation and RBI's stance on interest rates
Moody's anticipates India's retail inflation to reach 5.2% in 2024 and 4.8% in 2025. The agency believes that the Reserve Bank of India (RBI) will likely keep interest rates steady in the coming months, given strong growth and firm inflation. "Given the solid growth dynamics and inflation above the 4% target, we do not expect policy easing any time soon," Moody's said. In January, headline inflation dropped to 5.1% from 5.7% in previous month, while core inflation eased to 3.5%.
Growth projection of G20 economie reduced
Moody's predicts that G20 economies will collectively grow by 2.4% in 2024 and 2.6% in 2025, down from 2.9% in 2023. The agency projects growth for G20 emerging market countries at 3.8% in 2024 and 3.9% in 2025, following a growth of 4.7% in 2023. Moody's highlighted signs of private capex cycle picking up in India, with RBI reporting a 23% increase in the total cost of private corporate projects approved by major banks during April-December 2023 YoY.
India's economic momentum and upcoming elections
Strong GST collections, rising auto sales, consumer optimism, and double-digit credit growth are high-frequency indicators that suggest urban consumption demand in India will remain robust. Expanding manufacturing and services PMIs (Purchasing Managers' Index) also point to solid economic momentum. The year 2024 is an election year for several G-20 countries, including India. Moody's noted that "leaders elected this year will influence domestic and foreign policies for the next four to five years," with businesses adapting to changing geopolitical dynamics.
