Moody's upgrades India's 2024 GDP forecast amid strong economic momentum

Moody's Investor Service has bolstered its gross domestic product (GDP) forecast for India, citing robust economic performance in recent quarters. The ratings agency now anticipates India's GDP growth to reach 6.8 per cent in 2024, a major increase from its earlier projection of 6.1 per cent.

Highlighting India's stellar economic performance, Moody's pointed to stronger-than-expected data throughout 2023, which served as a catalyst for the revised forecast. India's economy surged in the final quarter of 2023, growing at 8.4 per cent, outpacing economists' estimates of 6.6 per cent.

Moody's underscored the continued momentum in India's economic activity, evident from high-frequency indicators showing robust performance in the third and fourth quarters of 2023, which has carried over into the first quarter of the current calendar year.

The ratings agency stressed on several key factors contributing to India's economic resilience. These include buoyant goods and services tax collections, increasing auto sales, a positive consumer outlook, and double-digit credit expansion, all of which indicate sustained urban consumption demand.

On the supply side, expanding manufacturing and services Purchasing Managers' Index (PMIs) further affirm India's solid economic momentum, according to Moody's assessment.

Moody's expects policy continuity following the upcoming general election scheduled for May, along with a continued emphasis on infrastructure development. While private industrial capital spending has been sluggish, Moody's anticipates a gradual uptick, fuelled by ongoing benefits from supply chain diversification and investor response to government initiatives aimed at bolstering key manufacturing sectors.

Rising capacity utilisation, robust credit expansion, and optimistic business sentiment collectively signal an improved outlook for private investment, according to the ratings agency.

However, Moody's also acknowledged the persistent challenge of inflation, with headline inflation moderating to 5.1 per cent in January but remaining above the central bank's target of 4 per cent. Given the solid growth trajectory and inflationary pressures, Moody's does not anticipate any imminent policy easing by the central bank.

(With Reuters inputs)