Moody’s Raises India’s GDP Growth Forecast for 2024

March 5, 2024

Recently, Moody’s, a prominent global credit rating agency, revised its forecast for India’s GDP growth in 2024 upwards from 6.1% to 6.8%. The agency’s decision reflects both global and domestic optimism in the country’s economy, driven by robust manufacturing activity and substantial infrastructure spending.

Increased Growth Estimate

Moody’s raised its 2024 growth estimate for India to 6.8% from the previous projection of 6.1%. The agency attributed this upward revision to stronger-than-expected economic data in 2023, highlighting India’s resilience amidst global challenges. Moody’s expects India to remain the fastest-growing economy among the G-20 nations over the forecast horizon.

Robust Economic Performance

India’s economy demonstrated remarkable growth in the December quarter (Q3 FY24), registering an impressive 8.4% expansion. This growth surpassed expectations and allayed concerns of a potential slowdown. The manufacturing, electricity, and construction sectors played a crucial role in driving this robust performance.

Revised GDP Estimates

The statistics ministry of Govt. of India also raised the GDP growth estimate for FY24 to 7.6% in its second revised estimate, up from the initial 7.3% projection in the first advance forecast. This revision aligns with the Reserve Bank of India’s GDP growth estimate of 7% for FY24, while the International Monetary Fund forecasts a slightly lower growth rate of 6.7%.

Factors Contributing to Growth

Government Capital Spending and Manufacturing Activity

Moody’s identified capital spending by the government and strong manufacturing activity as significant contributors to India’s robust growth outcomes in 2023. The agency expects policy continuity after the general election and a sustained focus on infrastructure development to further support economic growth.

Private Industrial Capital Spending

Although private industrial capital spending in India has been slow, Moody’s anticipates an uptick driven by ongoing supply chain diversification benefits and investors’ positive response to the government’s production-linked incentive (PLI) scheme. The PLI scheme aims to boost key manufacturing industries, attracting increased investment.

Improving Private Investment Outlook

Rising capacity utilization, robust credit growth, and upbeat business sentiment point towards an improving outlook for private investment in India. These factors are expected to contribute to the country’s economic momentum in the coming years.

High-Frequency Indicators and Economic Momentum

High-frequency indicators suggest that the strong economic momentum witnessed in Q3 and Q4 of the previous year carried into the first quarter of 2024 (January-March period). This sustained growth across various sectors bodes well for India’s economic prospects.