Moody's raises India's 2024 GDP growth estimate to 6.8% from earlier forecast of 6.1%

Moody's Investors Service has raised India's 2024 GDP growth estimate to 6.8% from its previous forecast of 6.1%. This revision comes amidst capital spending by the government and robust manufacturing activity driving economic momentum.

The rating agency anticipates a GDP growth of 6.4% in 2025, slightly up from its earlier forecast of 6.3%. Moody's attributes India's strong economic performance to a variety of factors, including capital spending by the government and vigorous manufacturing activity. The agency expects that India's real GDP expanded by 8.4% year-over-year in the fourth quarter of 2023, resulting in a full-year growth rate of 7.7%.

Moody's expects India's economy to comfortably register 6-7% real GDP growth in the coming years. The agency anticipates policy continuity after the general election and continued focus on infrastructure development. Despite inflation hovering above the 4% target, Moody's does not foresee any immediate policy easing.

In its February update of the Global Macro Outlook 2024-25, Moody's predicts that the Reserve Bank of India will likely maintain interest rates given the strong growth and firm inflation outlook. The agency forecasts India's retail inflation at 5.2% in 2024 and 4.8% in 2025.

Furthermore, Moody's expects the growth of G20 economies to stabilize at moderately lower levels in 2024. The agency forecasts collective expansion of G20 economies by 2.4% in 2024 and 2.6% in 2025, down from 2.9% in 2023. Moody's also notes indications of the private capex cycle gaining momentum, with private industrial capital spending expected to pick up due to ongoing supply chain diversification benefits and the government's Production Linked Incentive scheme.

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