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

India's real GDP expanded 8.4% year-over-year in the fourth quarter of calendar year 2023, resulting in a 7.7% growth for full-year 2023.

Updated - March 04, 2024 11:41 am IST

Published - March 04, 2024 11:35 am IST - New Delhi

Global rating agency Moody's on March 4 raised India's growth forecast for 2024 calendar year to 6.8%, from 6.1% estimated earlier, on the back of 'stronger-than-expected' economic data of 2023 and fading global economic headwinds.

India's real GDP expanded 8.4% year-over-year in the fourth quarter of calendar year 2023, resulting in a 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,” Moody’s Investors Service said.

“With global headwinds fading, the Indian economy should be able to comfortably register 6-7% real GDP growth,” it added.

"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%. India is likely to remain the fastest growing among G20 economies over our forecast horizon," Moody's said in its Global Macroeconomic Outlook for 2024. For 2025, the GDP growth is estimated at 6.4%.

The agency said high-frequency indicators show that the economy's strong September and December quarter momentum carried into the March quarter of 2024.

"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 said.

This year's interim Budget targets capital expenditure allocation of ₹11.1 lakh crore or 3.4% of GDP in 2024-25 (fiscal year 2025), 16.9% above the 2023-24 estimates. "We expect policy continuity after the general election and continued focus on infrastructure development," Moody's said.

The agency said 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, Indonesia, Mexico, South Africa (Ba2 stable), the U.K. and the U.S. 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 said geopolitical realities will be influencing international trade flows, capital flows, international migration trends and international organisations in the years to come. Domestically, industrial and trade policies of several countries are intertwined with foreign policy.

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