India’s digital infrastructure differentiates it from many of its emerging market peers: Moody’s

Infra push to support growth says Moody's

India’s infrastructure push will continue to support growth and create further employment opportunities in the economy, Moody’s Ratings said in a report on August 27, while lauding the government's efforts on digital infrastructure creation.

“The fast advancement of digital infrastructure in recent years, particularly the establishment of a digital public infrastructure, differentiates India from many of its emerging market peers. As a result, the country’s ranking in the World Bank's Logistics Performance Index has risen to 38 out of 139 countries, from 54 out of 160 10 years ago,” it said.

Digital public infrastructure includes government's efforts on identity, digital payments and digitising of records.

“The ongoing development of India's infrastructure will continue to help improve the business environment, attract private sector investment and create jobs in higher paying sectors,” the report stated.

The government in its recent Budget kept the capex target unchanged at Rs 11.1 lakh crore for FY25, a 17 percent increase from the previous fiscal.

The rating agency also highlighted that several related sectors like steel and cement are also likely to receive a fillip from the government’s infrastructure push.

“An accompanying higher demand for transportation services will benefit transportation related sectors, such as automotive manufacturing, airlines and ride-hailing services,” Moody’s Ratings said.

“Consumer goods, particularly the fast moving consumer goods sector, has greatly benefit from both digital and physical infrastructure development, and this trend will continue,” it further added.

A Moneycontrol analysis found that a significant majority of this investment, around 50 percent is focused on roads and Railways capex.

Highlighting challenges, Moody’s noted that the government needed to work on challenges such as low participation in higher education and gender gap in education to boost employment in non-agricultural sectors.

“Elevated unemployment rate, which averaged 8.1 percent in 2023 and was higher than that recorded in each of the three years preceding COVID-19, combined with weak real wage growth as a result of high inflation, will continue to hold back household consumption growth,” Moody’s noted.

The rating agency predicts the Indian economy to expand 6.8 percent in 2024, followed by 6.5 percent growth in the following year.