Updated May 31st, 2024 at 18:05 IST

Moody's projects India's GDP to expand by 6.8% in 2024

India's GDP grew by 8.2 per cent, up from 7 per cent in 2022-23, bolstered by significant government capital spending and strong manufacturing activity.

Reported by: Business Desk
Moody's maintains India's 2023 growth forecast | Image:Reuters
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Moody's Ratings has projected a 6.8 per cent growth in India's GDP for the current year, driven by robust economic expansion and policy continuity following the elections. The agency also forecasts a 6.5 per cent growth in 2025. In financial year 2023-24, India's real GDP grew by 8.2 per cent, up from 7 per cent in 2022-23, bolstered by significant government capital spending and strong manufacturing activity.

Last financial year India recorded economic growth of 8.2 per cent.

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High-frequency indicators, such as strong goods and services tax collections, rising auto sales, consumer optimism, and expanding manufacturing and services PMIs, signal sustained economic momentum through the March and June quarters.

Moody's stated, "We believe the Indian economy should comfortably register 6-7 per cent annual real GDP growth and we forecast around 6.8 per cent growth," in its update to the Global Macro Outlook 2024-25.

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The agency attributes this sustained, broad-based growth to post-election policy continuity. The interim Budget for this year targets a capital expenditure allocation of Rs 11.1 lakh crore, or 3.4 per cent of GDP for 2024-25, which is 16.9 per cent higher than the 2023-24 estimates.

"We expect policy continuity after the general election and continued focus on infrastructure development," Moody's added. The report highlights that private industrial capital spending is set to increase due to ongoing supply chain diversification and the government's production-linked incentive (PLI) scheme aimed at boosting targeted manufacturing industries.

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According to government data, companies have invested around ₹1.07 trillion by December 2023 across the 14 sectors covered under the PLI scheme, with exports surpassing ₹3.40 trillion since the scheme's implementation. Moody's also noted, "Healthy corporate and bank balance sheets, rising capacity utilization, and upbeat business sentiment point to an improving private investment outlook."

Despite sporadic food price pressures contributing to inflation volatility, headline and core inflation eased to 4.8 per cent and 3.2 per cent, respectively, in April, down from their 2022 peaks of 7.8 per cent and 7.1 per cent. The Reserve Bank of India (RBI) maintained the repo rate at 6.5 per cent in April, unchanged since February 2023.

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"Given the solid growth dynamics and inflation above the 4 per cent target, we do not expect policy easing any time soon," Moody's Ratings concluded.

(With PTI inputs)
 

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Published May 31st, 2024 at 18:05 IST