In exciting news for India’s economy, Moody’s Investors Service has boosted its growth forecast for the country’s 2024 calendar year to 6.8%, showcasing a positive outlook driven by robust economic performance. Let’s dive into the details and explore what this means for India’s future.
Upgraded to 6.8% by Moody’s for India’s 2024 calendar year
Economic Performance
Real GDP expanded by 8.4% in Q4 2023, resulting in 7.7% growth for the full year
Factors Driving Growth
Government spending initiatives, thriving manufacturing sector, and robust high-frequency indicators
Policy Focus
Continued emphasis on infrastructure development, increased capital expenditure
Global Economic Dynamics
Geopolitical realities influencing international trade and capital flows
Moody’s Optimistic Revision
Upward Revision: 6.8% Growth Forecast
Moody’s, the global rating agency, has revised India’s growth forecast upwards from its earlier projection of 6.1% for 2024. This upward revision reflects the country’s strong economic performance and the dissipating global economic challenges.
India’s Economic Performance in 2023
Impressive Growth: 7.7% for the Full Year
India’s real GDP witnessed an impressive expansion of 8.4% year-on-year in the fourth quarter of 2023, leading to a remarkable 7.7% growth for the entire year. Various factors contributed to this growth, including government capital spending initiatives and a thriving manufacturing sector.
Continued Momentum in 2024
High-frequency indicators suggest that India’s economic momentum from late 2023 has continued into the March quarter of 2024. Robust indicators such as goods and services tax collections, rising auto sales, and consumer optimism, along with double-digit credit growth, indicate strong urban consumption demand. Additionally, expanding manufacturing and services PMIs signal solid economic momentum on the supply side.
Policy Focus and Expectations
Infrastructure Development: Key Priority
India’s interim budget for the fiscal year 2024-25 allocates Rs 11.1 lakh crore, or 3.4% of GDP, towards capital expenditure, representing a significant increase over the previous year. Moody’s anticipates policy continuity post-election, with a sustained emphasis on infrastructure development.
Private Industrial Spending: Expected Increase
While private industrial capital spending has been sluggish, Moody’s expects a rise driven by ongoing supply chain diversification benefits and the government’s Production Linked Incentive scheme, aimed at boosting targeted manufacturing industries.
Monetary Policy: Caution Expected
The RBI is likely to maintain a cautious stance on monetary policy, given that inflation remains above the 4% target. Moody’s does not foresee any policy easing soon, considering the RBI’s decision to keep the repo rate steady at 6.5% since March 2023.
Global Economic Dynamics
G20 Growth Outlook
Moody’s forecasts that G20 economies will collectively expand by 2.4% in 2024 and 2.6% in 2025, slightly down from 2.9% in 2023. The agency also underscores the impact of geopolitical realities on international trade, capital flows, and migration trends, leading businesses to reorganize supply chains and capital sources.
