Economy: Moody’s ups India growth forecast to 6.8% for 2024

Virendra Pandit

New Delhi: Global rating agency Moody’s on Monday raised India’s growth forecast for the 2024 calendar year to 6.8 percent, from 6.1 percent estimated earlier, on the back of ‘stronger-than-expected’ economic data of 2023 and fading global economic headwinds.

This forecast came a day after Prime Minister Narendra Modi, exuding confidence in the last Cabinet meeting he headed on Sunday, directed the ministers and bureaucrats to chart out a 100-day plan for implementation after his government returns to power in May 2024.

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

The media, quoting Moody’s Investors Service, reported that capital spending by the government and strong manufacturing activity meaningfully contributed to the robust growth outcomes in 2023.

With global headwinds fading now, the Indian economy should be able to comfortably register 6 to 7 percent real GDP growth, it predicted.

“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 per cent from 6.1 per cent. India is likely to remain the fastest growing among G-20 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 percent.

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, tabled in Parliament on February 1, targets capital expenditure allocation of Rs 11.1 lakh crore or 3.4 percent of GDP in 2024-25 which is 16.9 percent higher than the 2023-24 estimates.

“We expect policy continuity after the general election and continued focus on infrastructure development,” Moody’s said.

While private industrial capital spending has been slow to pick up, it might go up with ongoing supply chain diversification benefits and investors’ response to the government’s Production Linked Incentive (PLI) scheme to boost key targeted manufacturing industries.

The year 2024 is an election year for several G-20 countries including India, Indonesia, Mexico, South Africa, the UK, and the US.

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 reorganizing supply chains and capital sources,” Moody’s said.
Geopolitical realities will influence international trade flows, capital flows, international migration trends, and international organizations in the years to come. Domestically, the industrial and trade policies of several countries are intertwined with foreign policy.