Moody's has revised the growth forecast for India's gross domestic product for 2024 to 6.8% from 6.1%, citing stronger-than-expected data in 2023.
Growth forecasts lifted by strong demand momentum as the real GDP expanded 8.4% year-over-year in the October–December period, resulting in 7.7% growth for 2023, it said in a note.
"We believe that with global headwinds fading, the Indian economy should be able to comfortably register 6%–7% real GDP growth and we therefore forecast around 6.8% growth in calendar year 2024, followed by 6.4% in 2025," it said.
Capital spending by the government and strong manufacturing activity have meaningfully contributed to the robust growth outcomes in 2023, the note said. "We expect policy continuity after the general election and continued focus on infrastructure development."
Private industrial capital spending has been slow to pick up, but 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, according to the global ratings agency.
The total cost of private corporate projects sanctioned by major banks and financial institutions was up 23% during April–December 2023 compared with the same period a year ago, suggesting that the private capex cycle is gaining steam, according to the RBI.
High-frequency indicators show that the economy's strong third and fourth-quarter 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.
"Given the solid growth dynamics and inflation above the 4% target, we do not expect policy easing any time soon," Moody's said.
It pointed out that 2024 is an election year for several G-20 countries, including India, Indonesia, Mexico, South Africa, the UK and the US.
Implications of elections can go beyond borders, and economic and public policy in an increasingly fractious world. Leaders elected this year will influence domestic and foreign policies for the next four to five years. Businesses are accordingly responding to evolving geopolitical dynamics by reorganising supply chains and capital sources, it said.
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