Moody's projects India to grow 6.8% in 2024 on strong growth, post-poll policy continuity

India's real GDP grew 7.7 per cent in 2023, up from 6.5 per cent in 2022, driven by robust capital spending by the government and strong manufacturing activity.

Moody's Ratings on May 31 projected India's GDP expansion at 6.8 percent in the current year, followed by 6.5 percent in 2025, on the back of strong economic expansion and policy continuity post-election.

Driven by the Centre's robust capital spending and strong manufacturing activity, India's real GDP growth in 2023 stood at 7.7 percent, up from 6.5 percent in 2022.

"We believe the Indian economy should comfortably register 6-7 per cent annual real GDP growth and we forecast around 6.8 per cent growth," Moody's said in its update to Global Macro Outlook 2024-25.

According to Moody's, strong, broad-based growth will likely be sustained with post-election policy continuity.

Also, high-frequency indicators such as robust GST collections, increase in auto sales, consumer optimism, and expanding manufacturing and services PMIs, have signalled sustained economic momentum in the March and June quarter this year.

According to Moody's, this year's interim Budget targets capital expenditure allocation of Rs 11.1 lakh crore, or 3.4 percent of GDP in 2024-25, 16.9 percent above the 2023-24 estimates.

"We expect policy continuity after the general election and continued focus on infrastructure development," the ratings agency said.

Private industrial capital spending is also expected to pick up with ongoing supply chain diversification and the government's PLI scheme to boost targeted manufacturing industries, Moody's Ratings added.

Notably, companies have invested around Rs 1.07 trillion through December 2023 across the 14 sectors covered under the PLI scheme, with exports surpassing Rs 3.40 trillion since the scheme's implementation, as per government data.

"Healthy corporate and bank balance sheets, rising capacity utilisation and upbeat business sentiment also point to an improving private investment outlook," Moody's said.

Although sporadic food price pressures continue to inject volatility in the inflation trajectory, headline and core inflation eased to 4.8 percent and 3.2 percent, respectively, in April, down sharply from their respective 2022 peaks of 7.8 percent and 7.1 percent.

The RBI in April held the repo rate steady at 6.5 percent, unchanged since February 2023. "Given the solid growth dynamics and inflation above the 4 percent target, we do not expect policy easing any time soon," Moody's Ratings said.

(With PTI inputs)