Moody’s upgrades India’s FY24 GDP growth forecast to 8%

The rating agency said it expects India to be the fastest-growing economy among the major G20 countries

Rhik Kundu
First Published7 Mar 2024
Moody's last week raised its forecast for India's GDP growth in calendar 2024 to 6.8% from its earlier projection of 6.1%. (Reuters)
Moody’s last week raised its forecast for India’s GDP growth in calendar 2024 to 6.8% from its earlier projection of 6.1%. (Reuters)

Rating agency Moody's on Thursday raised its forecast for India's GDP growth in FY24 to 8% from 6.6% on the back of strong government expenditure and domestic consumption.

The upgrade comes a week after the rating agency raised its forecast for India's GDP growth in calendar 2024 to 6.8% from 6.1%.

"We expect India to be the fastest-growing economy among major G20 countries, with its real GDP growth to accelerate to around 8% in the fiscal year ending March 2024 (fiscal 2023-24) from 7.0% in fiscal 2022-23," Moody's said in its Banking System Outlook report.

"Government capital expenditure and strong domestic consumption will underpin India's economic growth. Moreover, India is poised to benefit from increased global trade and investment opportunities arising from companies' strategies to diversify away from China," the rating agency said.

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

Also read: Moody's upgrades India's 2024 GDP growth forecast to 6.8%

The growth in the third quarter reported by the statistics ministry was also higher than the 7.6% reported for the preceding second quarter, which was revised to 8.1%, while the Q1 GDP growth figures were updated to 8.2%.

The high growth number has also meant a revision in the estimate for GDP growth in FY24 by the National Statistical Office, from 7.3% in its first advance forecast to 7.6% in its recent second revised estimate. 

Reserve Bank of India’s economic growth estimate for FY24 is 7%, while the International Monetary Fund's forecast is 6.7%.

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.

"We expect India's inflation rate will decline to 5.5% in fiscal 2023-24 from a peak of 6.7% in fiscal 2022-23, and further disinflation will support monetary easing going forward," Moody's said in its latest report.

India's headline inflation eased in January to 5.1% from 5.7% in the month prior. Core inflation also moderated to 3.5%, down from 3.8%, over the same period.

"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 said.

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