India in a sweet spot with solid growth and moderating inflation: Moody’s Ratings

Moody's Ratings says India in a sweet spot

The Indian economy will continue to grow at a robust pace, with 2024 growth at 7.2 percent compared with 7.7 percent in the previous year, Moody’s Ratings noted in its Global Macro Outlook released on November 15.

“Indian economy is in a sweet spot, with a mix of solid growth and moderating inflation. We forecast 7.2% growth for calendar year 2024, followed by 6.6% in 2025 and 6.5% in 2026,” the global rating agency said, highlighting that the economy will continue its steady momentum in the July-September quarter.

The Indian economy had expanded 6.7 percent in the April-June quarter of 2024.

“High-frequency indicators – including expanding manufacturing and services PMIs, robust credit growth and consumer optimism – signal steady economic momentum in Q3,” Moody’s Ratings said.

“Household consumption is poised to grow, fueled by increased spending during the ongoing festive season and a sustained pickup in rural demand on the back of an improved agricultural outlook,” it further highlighted.

It also pointed a better outlook for inflation as it forecasted inflation to ease in the coming months.

“Despite the near-term uptick, inflation should moderate toward the RBI’s target in the coming months as food prices ease amid higher sowing and adequate food grain buffer stocks,” the report said.

India’s inflation climbed to a 14-month high of 6.2 percent in October, breaching RBI’s upper limit of 2-6 percent band and dashing hopes of a rate cut in the December meeting.
The central bank’s monetary policy committee had retained the policy rate at 6.5 percent for the tenth consecutive time at its meeting in October.

“Although the central bank shifted its monetary policy stance to neutral while keeping the repo rate steady at 6.5% in October, it will likely retain relatively tight monetary policy settings into next year given the fairly healthy growth dynamics and inflation risks,” as per Moody’s.
The rating agency was also optimistic about the future.

“India's (Baa3 stable) economy is growing robustly and has the potential to sustain high growth rates as strong private sector financial health reinforces a virtuous economic cycle,” it said.
The G20 economies are poised to grow 2.8 percent in 2024, but the US election could complicate matters for the economies.

“Post-election changes in US domestic and international policies could potentially accelerate global economic fragmentation, complicating ongoing stabilization,” said Madhavi Bokil, senior vice president, Moody’s Ratings