Moody's projects India's economy to sustain strong growth with a 7.2% expansion in 2024. The economy, described as in a "sweet spot," balances solid growth and decreasing inflation. High-frequency indicators signal ongoing economic strength, with household consumption expected to rise. Moody's foresees easing inflation despite recent upticks. The agency remains optimistic about India's economic future, emphasizing its robust growth and potential for sustaining high growth rates, despite global economic uncertainties.
According to Moody's Ratings' recently released Global Macro Outlook on November 15, the Indian economy is set to maintain its robust growth, projecting a 7.2 percent expansion in 2024, slightly lower than the previous year's 7.7 percent growth. However, this adjustment does not dim the positive outlook for India's economic landscape.
Describing the Indian economy as being in a "sweet spot," Moody's highlighted the blend of solid growth and moderating inflation that characterizes the current scenario. The agency forecasts a growth rate of 7.2% for the calendar year 2024, followed by 6.6% in 2025 and 6.5% in 2026. Notably, the economy is expected to maintain its steady momentum through the July-September quarter, following a 6.7 percent expansion in the April-June quarter of 2024.
Moody's pointed to various high-frequency indicators, such as expanding manufacturing and services PMIs, robust credit growth, and optimistic consumer sentiment, as signals of a continued strong economic momentum in the third quarter. The agency also emphasized the potential for growth in household consumption, driven by increased spending during the festive season and a sustained rise in rural demand supported by positive agricultural prospects.
In terms of inflation, Moody's forecasted an easing trend in the upcoming months, despite a recent uptick that saw inflation in India reaching a 14-month high of 6.2 percent in October. This increase breached the Reserve Bank of India's upper limit of the 2-6 percent band, impacting expectations of a rate cut in the upcoming December meeting. The central bank's decision to maintain the policy rate at 6.5 percent for the tenth consecutive time in October reflected a cautious stance, considering the prevailing economic dynamics and inflation risks.
While the central bank shifted its monetary policy stance to neutral in October, Moody's anticipates that it will likely maintain relatively tight monetary policy settings into the next year to support the healthy growth trajectory and manage inflation risks effectively.
Looking ahead, Moody's remains optimistic about India's economic prospects, citing its robust growth and the potential for sustaining high growth rates supported by strong private sector financial health, which creates a virtuous economic cycle.
On a broader global scale, the G20 economies are expected to grow by 2.8 percent in 2024. However, Moody's Senior Vice President, Madhavi Bokil, warned that potential post-election changes in US domestic and international policies could complicate matters by accelerating global economic fragmentation, impacting ongoing stabilization efforts.
In conclusion, despite minor adjustments in growth projections and challenges on the global front, the overall outlook for India's economy remains positive, with a strong foundation for continued growth and development in the coming years.
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