New Delhi [India], March 4 (ANI): India is poised to become the fastest-growing economy among the G20 nations, with Moody’s projecting a robust expansion in its real GDP, driven by strong demand momentum.
The latest report from Moody’s Analytics reveals promising forecasts for India’s economic growth trajectory, attributing it to various factors including government capital spending, manufacturing activity, and resilient consumption demand.
According to Moody’s Analytics, India’s real GDP surged by 8.4 per cent year-over-year in the fourth quarter of calendar year 2023, culminating in a full-year growth rate of 7.7 per cent for 2023.
Building upon this momentum, Moody’s predicts a continued growth rate ranging between 6.0 per cent to 7.0 per cent in real GDP, forecasting a solid 6.8 per cent growth for calendar year 2024 followed by 6.4 per cent in 2025.
These projections signify a remarkable performance for the Indian economy amidst global economic challenges.
While private industrial capital spending has been slow to pick up, it is expected to pick up with ongoing supply chain diversification benefits and investors’ response to the government’s Production Linked Incentive scheme to boost key targeted manufacturing industries.
Additionally, rising capacity utilization, robust credit growth and upbeat business sentiment point to an improving outlook for private investment.
Data from the Reserve Bank of India (RBI) indicates a 23 per cent increase in the total cost of private corporate projects sanctioned by major banks and financial institutions, suggesting a resurgence in private capex.
High-frequency indicators show that the economy’s strong Q3 and Q4 momentum carried into the first quarter of this year. Robust goods and services tax collections, rising auto sales, consumer optimism and double-digit credit growth suggest urban consumption demand remains resilient. On the supply side, expanding manufacturing and services PMIs add to evidence of solid economic momentum.
The interim budget for 2024-25 allocates a substantial Rs 11.1 trillion towards capital expenditure, reflecting a strategic focus on infrastructure development.
Moody’s expects policy continuity post-general election and a sustained emphasis on bolstering infrastructure.
Robust indicators such as goods and services tax collections, rising auto sales, buoyant consumer sentiment, and double-digit credit growth underscore the resilience of urban consumption demand.
Furthermore, expanding manufacturing and services Purchasing Managers’ Index (PMI) figures provide additional evidence of sustained economic vigor.
Inflationary pressures, however, have exhibited a mild moderation, with headline inflation easing to 5.1 per cent in January from 5.7 per cent in the preceding month.
Core inflation also witnessed a decline to 3.5 per cent from 3.8 per cent in December. Despite these trends, the RBI opted to maintain the repo rate at 6.5 per cent during its February meeting, a stance consistent since March 2023.
Moody’s suggests that given the robust growth dynamics and inflation hovering above the 4.0 per cent target, policy easing is unlikely in the near term.
Looking ahead, the Reserve Bank of India is expected to maintain its current policy stance in the upcoming months, balancing strong economic growth with inflationary concerns.
Meanwhile, G20 economies, collectively, are anticipated to experience a modest growth of 2.4 per cent in 2024 and 2.6 per cent in 2025, a slight decline from the 2.9 per cent growth recorded in 2023.
Advanced economies (Argentina, Brazil, China, India, Indonesia, Mexico, Russia, South Africa, Turkey) within the G20 are expected to witness a slowdown from 1.8 per cent in 2023 to 1.5 per cent in 2024 and 1.6 per cent in 2025.
Emerging market countries within the G20 are projected to grow at a rate of 3.8 per cent in 2024 and 3.9 per cent in 2025, following a 4.7 per cent growth in 2023. (ANI)
