Moody's Investors Service, New York, expects the gross domestic product growth in India to be higher at 7.2% in 2024, compared with the previous estimate of 6.8% due to a rise in private consumption that is spurring overall economic demand.
The rating agency said household spending would increase as inflation approaches the target of the Reserve Bank of India. Better farming output because of above-average rainfall in the current monsoon season is driving early signs of pick-up in rural demand. "This projection is supported by solid, all-inclusive growth", said Moody's in a statement, adding that further upward revision to their forecast will be done if private consumption grows further.
This revised projection is in tune with the RBI's own estimate of growth in the economy, which puts it at 7.2% for the year 2024-2025. It said this would, however, be partly offset by yet another surge in optimism relating to exports. The improved rural and urban demand on account of higher expected take-home pay was factored in by the central bank. The RBI also pointed out that better monsoon conditions are likely to improve farm sector growth and boost rural incomes. Moody's also cited strong performance in industry and services as reflected in the Purchasing Managers' Index as indicative of stronger momentum.
Going forward, Moodys now estimates the Indian economy to rise 6.6% in 2025 against the previous estimate of 6.4%. The rating agency repeated that India's potential long-term growth prospects are determined by the ability of the country to employ its surplus labor. Under the prevailing conditions, a growth rate of 6-7% was achievable. Secondly, India's external economic environment has improved in recent years as reflected by a significant decline in its CAD.
On a global scale, Moody's forecast a moderate global growth of 2.7% in 2024 and 2.5% in 2025, compared with 3% in 2023, reflecting diverging trends between countries. It does foresee the shift from a cyclical recovery phase to an expansionary phase. But ongoing geopolitical tensions and the weakening US economic outlook are also leading risks to global economic stability.
At the monetary policy review on August 8, Governor Shaktikanta Das reiterated that real GDP growth for 2024-25 was estimated at 7.2% with quarterly growth rates of 7.1% in Q1, 7.2% in Q2, 7.3% in Q3, and 7.2% in Q4. Similarly, Q1 growth for 2025-26 has been estimated at 7.2% in the review.
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