Moody’s Upgrades India’s Growth to 7.2% for 2024

On Thursday, Moody’s Ratings, headquartered in New York, revised its forecast for India’s GDP growth in 2024, raising it to 7.2% from the previously projected 6.8%. This adjustment reflects a surge in private consumption, which is boosting overall demand within the economy. Moody’s noted that as headline inflation approaches the RBI’s target, household consumption is expected to increase. Early signs of a resurgence in rural demand are also emerging, fueled by favorable agricultural conditions following an above-average monsoon season.

Moody’s highlighted that the revised forecast aligns with the RBI’s projection of 7.2% growth for the Indian economy in 2024-25. This outlook factors in increased rural and urban demand as significant growth drivers. The RBI had previously indicated that the improved monsoon would lead to stronger agricultural output and higher rural incomes, contributing to the enhanced growth rate.

Additionally, Moody’s pointed to robust performances in the industrial and services sectors, as indicated by the Purchasing Managers’ Index, which supports the expectation of higher growth momentum. For 2025, the agency anticipates a growth rate of 6.6%, up from an earlier projection of 6.4%.

Looking beyond the short term, India’s growth prospects hinge on its ability to effectively utilize its large labor force. Moody’s believes that with current conditions, the Indian economy could sustain a growth rate of 6-7% in the medium to long term. The agency also noted improvements in India’s external position, highlighted by a reduced current account deficit.

Globally, Moody’s forecasts a slowdown in growth, expecting it to decrease to 2.7% in 2024 and 2.5% in 2025, down from 3% in 2023. The agency anticipates a shift from cyclical recovery to expansion for many countries, though global economic risks, including geopolitical conflicts and a deteriorating U.S. economic outlook, remain significant.

RBI Governor Shaktikanta Das, in the August 8 monetary policy review, confirmed a 7.2% real GDP growth forecast for 2024-25, with quarterly projections of 7.1% for Q1, 7.2% for Q2, 7.3% for Q3, and 7.2% for Q4. The growth forecast for Q1 2025-26 is also set at 7.2%.