Moody’s raises India’s growth forecast to 7.2% for 2024

India's growth forecast raised

Moody’s Ratings raised India’s growth forecast for 2024 to 7.2 percent from 6.8 percent projected earlier, predicting a higher pick up for private consumption.

"These forecast changes assume strong broad-based growth and we recognise potentially higher forecasts if the cyclical momentum, especially for private consumption, gains more traction," the rating agency said.

It also cited strong performances on industrial and service sector, indicated by Purchasing Managers' Index, as sign of higher momentum.

"Household consumption is poised to grow as headline inflation eases toward the RBI’s target. Indeed, signs of a revival in rural demand are already emerging, on the back of improving prospects for agricultural output amid above-normal rainfall during the monsoon season," Moody's Ratings further noted.

The Indian economy is also expected to grow faster at 6.6 percent in 2025, compared with 6.4 percent projected earlier, the global ratings agency said on August 29.

A recent RBI paper had projected a pick up in private capex in the current fiscal.

"Over the medium- and longer-term, India’s growth prospects depend on how well the country can productively tap its substantial pool of labour...6%-7% growth should be possible for the economy sheerly on the basis of present conditions," Moody's stated.

The global rating concern also lauded efforts on rapid digitalisation and financial inclusions as positives for the economy, besides the improvement in India's external position.

"India’s external position has also strengthened in recent years amid a marked narrowing of its current account deficit," Moody's said.

The Indian economy expanded 7.8 percent in the first quarter of 2024. Numbers for the April-June quarter will be available on August 30.

A Moneycontrol poll shows that growth is likely to slow to a five-quarter low of 6.8 percent in April-June quarter.

“Global growth is stabilising and inflation in most markets is close to central bank targets. We expect global growth will slow to 2.7% and 2.5% in 2024 and 2025, respectively, from 3.0% in 2023, though growth trends differ across countries,” Moody’s said predicting no change to the global outlook.

Moody's predicts countries to move from cyclical recovery to expansionary phase.

Besides geopolitical frictions and ongoing conflicts, it said that the deteriorating US economic outlook was the most immediate risk for the global economy.