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Business News/ Economy / Moody's upgrades India's 2024 GDP growth forecast to 6.8%
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Moody's upgrades India's 2024 GDP growth forecast to 6.8%

The rating agency said that apart from domestic factors aiding growth, it expects India to also benefit from improving global conditions
  • Moody's also said it expects policy continuity after the general election and continued focus on infrastructure development
  • Moody's raises India's 2024 GDP growth estimate to 6.8% from 6.1% File Photo (REUTERS)Premium
    Moody's raises India's 2024 GDP growth estimate to 6.8% from 6.1% File Photo (REUTERS)

    NEW DELHI : Rating agency Moody's on Monday raised its forecast for India's GDP growth in 2024, reflecting both global and domestic optimism in the country's economy on the back of robust manufacturing activity and infrastructure spending.

    "India’s economy has performed well and stronger-than-expected data in 2023 has caused us to raise our 2024 growth estimate to 6.8% from 6.1%," the rating agency said in its Global Macro Outlook 2024-25.

    "India is likely to remain the fastest-growing among G-20 economies over our forecast horizon," it added.

    The Indian economy soared ahead in the December quarter (the third quarter of FY24) with a surprise growth of 8.4%, belying fears of tempering as the manufacturing, electricity and construction sectors put up a robust show.

    The statistics ministry also raised its GDP growth estimate for FY24 to 7.6% in its second revised estimate, up from 7.3% in its first advance forecast.

    The Reserve Bank of India’s GDP growth estimate for FY24 is 7%, while the International Monetary Fund’s forecasts 6.7%.

    "We believe that with global headwinds fading, the Indian economy should be able to comfortably register 6.0%-7.0% real GDP growth and we therefore forecast around 6.8% growth in calendar year 2024, followed by 6.4% in 2025," Moody’s said.

    "Capital spending by the government and strong manufacturing activity have meaningfully contributed to the robust growth outcomes in 2023. We expect policy continuity after the general election and continued focus on infrastructure development," it added.

    Moody's said while private industrial capital spending in India has been slow, it is expected to pick up with ongoing supply chain diversification benefits and investors' response to the government's production-linked incentive (PLI) scheme to boost key manufacturing industries.

    "Additionally, rising capacity utilization, robust credit growth and upbeat business sentiment point to an improving outlook for private investment," the rating agency said.

    "High-frequency indicators show that the economy's strong Q3 and Q4 momentum carried into the first quarter of this year," it added, referring to the January-March period as the first quarter.

    According to RBI, the total cost of private corporate projects sanctioned by major banks and financial institutions was up 23% annually during the April-December period as compared with the same period a year earlier, suggesting that the private capital expenditure cycle is gaining steam.

    Moody's expects India's urban consumption demand to remain resilient, based on robust goods and services tax collections, rising auto sales, consumer optimism and double-digit credit growth, while expanding manufacturing and services PMIs are expected to add to economic momentum.

    The Indian economy, which expanded at a four-month high in January, continued to strengthen in February, seeing accelerations in both manufacturing and services sectors during the month.

    While services sector growth climbed to a seven-month high in February, manufacturing sector growth reached a five-month high, firming India’s position as one of the fastest-growing major economies.

    The HSBC Flash India Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, climbed to 61.5 in February from a revised reading of 61.2 for January—well above the 50-point threshold that differentiates expansion from contraction.

    India's headline inflation also eased in January to 5.1% from 5.7% in the preceding month. Core inflation moderated to 3.5% from 3.8%.

    "The RBI held the repo rate steady at 6.5% in February—the same level since March 2023. Given the solid growth dynamics and inflation above the 4.0% target, we do not expect policy easing any time soon," Moody’s added.

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    ABOUT THE AUTHOR
    Rhik Kundu
    Rhik writes about the Indian economy and its crucial indicators. He is constantly navigating corporates, decoding policies, and dabbling with everything in between.
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    Published: 04 Mar 2024, 11:25 AM IST
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