India’s Economic Resilience: Moody’s Upgrades Growth Forecast for 2024

Global rating agency Moody’s has revised its growth forecast for India in the calendar year 2024 to an impressive 6.8%. Citing “stronger-than-expected” economic data, Moody’s predicts that India will continue to outpace other G20 nations, marking a notable increase from its earlier projection of 6.1%. This upward revision reflects the nation’s robust economic Growth and resilience against global headwinds.

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India’s real GDP exhibited robust growth, expanding by 8.4% year-on-year in the fourth quarter of 2023, culminating in a remarkable 7.7% growth for the entire year. Moody’s has highlighted the significant contributions of government-led capital spending and vigorous manufacturing activity to these positive growth outcomes in 2023.

In the final quarter of 2023, merchandise trade recorded a total value of US$ 281.87 billion. Within this, exports accounted for US$ 105.69 billion, while imports amounted to US$ 176.18 billion during the same period. This data reflects a 1.1% growth in exports compared to the corresponding period in the previous year.

With global headwinds fading, Moody’s anticipates that the Indian economy will comfortably register a 6-7% real GDP growth. The agency expressed confidence in India maintaining its status as the fastest-growing among G20 economies over the forecast horizon. Looking ahead to 2025, the GDP growth is estimated to reach 6.4%, reflecting sustained positive momentum.

High-Frequency Indicators and Economic Resilience

Moody’s pointed to high-frequency indicators that indicate the strong economic growth from the September and December quarters of 2023 carrying into the March quarter of 2024. Robust goods and services tax collections, rising auto sales, consumer optimism, and double-digit credit growth are cited as factors suggesting that urban consumption demand remains resilient. On the supply side, expanding manufacturing and services PMIs provide evidence of a solid economic foundation.

The interim budget for the fiscal year 2024-25 targets a capital expenditure allocation of ₹11.1 lakh crore, equivalent to 3.4% of GDP. This represents a substantial 16.9% increase over the estimates for 2023-24. Moody’s expects policy continuity after the general election and continued emphasis on infrastructure development. While private industrial capital spending has been slow to pick up, ongoing supply chain diversification benefits and a positive response to the government’s Production Linked Incentive(PLI) scheme are expected to drive increased investment in key manufacturing industries.

Inflation, Monetary Policy, and Global Transition

Inflation trends in January revealed a moderation to 5.1%, down from 5.7% in the previous month, with core inflation also easing to 3.5%. The Reserve Bank of India (RBI) maintained the repo rate at 6.5% in February, consistent since March 2023. Moody’s anticipates that the RBI will likely keep rates steady in the coming months, considering strong growth dynamics and firm inflation.

Geopolitical realities are projected to influence international trade flows, capital movements, migration trends, and the role of international organizations in the years to come. Domestically, the intertwining of industrial and trade policies with foreign policy adds complexity to the economic landscape. The year 2024 marks an election year for several G20 countries, including India, Indonesia, Mexico, South Africa, the UK, and the US. Moody’s highlights the potential implications of elections extending beyond borders, influencing economic and public policy in an increasingly complex global landscape. Leaders elected this year are expected to wield influence over domestic and foreign policies for the next four to five years.

Moody’s broader perspective extends to the global economic transition, noting a shift to a post-pandemic equilibrium. Major advanced and emerging markets are experiencing steady normalization in economic activity. Several advanced economies are approaching a soft landing, facilitated by effective policy maneuvers, improved supply-demand balances, and favorable conditions such as mild winters in Europe. The forecast for G20 economies collectively anticipates a 2.4% expansion in 2024 and a slight increase to 2.6% in 2025, compared to 2.9% in 2023.

Conclusion

India’s economic growth for 2024 appears optimistic, buoyed by its resilient performance and strategic policy measures. Moody’s revised growth forecast underscores the nation’s ability to navigate challenges and capitalize on opportunities, positioning itself as a standout performer in the global economic landscape. As geopolitical realities continue to influence international dynamics, India’s economic trajectory will be closely monitored, reflecting its growing importance on the world stage.