On 29th August 2024, Global Rating Agency, Moody’s Ratings announced that it has raised India’s Gross Domestic Product (GDP) growth forecast to 7.2% for Calendar Year (CY) 2024 from its previous estimate of 6.8% and to 6.6% for CY25, against its previous estimates of 6.5%. This estimation was part of their August update for the ‘Global Macro Outlook for 2024-25’.
- It has cited these projections reflect strong, broad-based growth, which is mainly attributed by resilient private consumption and improved business conditions.
Note: In July 2024, Moody’s released a report “Global Macro Outlook 2024 (July 2024 update)” and has kept India’s GDP growth forecast for 2024 unchanged at 6.8%, while predicting a growth of 6.5% for 2025.
Key Points:
i.According to Moody’s Ratings, the Indian economy showed a Year-over-Year (Y-o-Y) growth of 7.8% in the 1st Quarter (Q1:April-June) of 2024, despite the challenges posed by strict monetary policies and ongoing efforts towards fiscal consolidation.
- India is in a macroeconomic ‘sweet spot’ with strong growth and moderating inflation, which decreased to a 59-month low of 3.54% (in July) from a 4-month high of nearly 5.1% (in June).
ii.Moody’s observed that despite global growth is stabilizing and inflation is under central bank targets in major markets, global growth is still likely to decrease to 2.7% in 2024 and 2.5% in 2025, from 3.0% in 2023, though trends may vary from country to country.
iii.Moody’s has lowered India’s Consumer Price Index (CPI) inflation in 2024 by 20 basis points (bps) from 5.2% to 5.0%.
- While, it has kept average CPI inflation for 2025 unchanged at 4.8%.
- The household consumption is likely to grow as headline inflation or retail inflation eases to the Reserve Bank of India (RBI)’s 4% target.
iv.According to Moody’s, Indian economy growth is mainly driven by strong performance in the industrial and services sectors, with the services Purchasing Managers Index (PMI) remaining above the 60 mark since January 2024.
v.Moody’s indicated that signs of a revival in rural demand are already emerging, bolstered by improving agricultural output prospects due to above-normal rainfall during the monsoon season.
- This finding of Moody’s is in alignment with the Ministry of Agriculture and Farmers Welfare (MoA&FW)’s data, which showed that farmers across the country have sown kharif crops across 106.5 Million hectares (Mha) as of 27th August 2024.
Positive Outlook of Indian Economy:
i.According to Moody’s, Corporate and Bank Balance Sheets are healthier, with increased capital raising through equity and bonds.
- It noted that the recent paper by the RBI also projects a 54% increase in private capex in the current financial year i.e. Financial Year of 2024-25 (FY25), which is mainly driven by rising capacity utilization, positive business sentiment, and government infrastructure investments.
ii.Moody’s observed that India’s external position has also bolstered in recent years, with a significant reduction in its current account deficit. Indeed, the current account registered a modest surplus in the quarter ending March 2024, the first in 10 quarters primarily due to robust services exports and strong remittance inflows.
Related Information:
On 29th August 2024, International Ratings Agency, Fitch has affirmed India’s long-term foreign currency issuer rating at ‘BBB’ with a stable outlook and fiscal credibility. It has cited this rating is based on India’s robust medium-term growth prospects and solid external finance position.
About Moody’s Ratings:
President- Michael West
Headquarters- New York, the United States of America (USA)
Founded – 1909
