Moody’s raises India’s 2024 growth forecast to 7.1% on better growth in Asia-Pacific

New Delhi: Moody's has revised its calendar year (CY) 2024 growth forecast for India to 7.1%, from its earlier estimates of 6.8% in June, as it expects growth in the Asia-Pacific region to outpace the global economy.

It, however, kept its India growth forecast for CY 2025 unchanged at 6.5%.

The revision in India's growth forecast by Moody's comes a month after Moody’s Ratings similarly upgraded GDP growth forecast to 7.2% in 2024 and 6.6% in 2025.

India's GDP growth

The World Bank earlier in September revised its fiscal year 2025 or FY25 growth forecast for India to 7%, from its previous estimate of 6.6%, citing government spending on infrastructure, a rise in household investments in real estate, better-than-expected monsoon and agricultural output, and an increase in private consumption.

Similarly, the International Monetary Fund upgraded India's GDP growth in the ongoing fiscal (FY25) by 20 basis points to 7% in July. 

Also read | Domestic engines to power India's growth: IMF

"In developing Asia, growth will slow to 5.1% in 2024 and 4.9% in 2025 from 5.5% in 2023. Normalizing growth in India will also drag on the region’s performance," said a Moody's Analytics commentary titled 'APAC Outlook: Two Steps Forward, One Step Back.'

"After a strong post-pandemic rebound of 7.8% in 2023, Indian GDP growth will slow to 7.1% in 2024 and 6.5% in 2025," it added.

The Indian economy, buoyed by healthy domestic demand, a surge in investment and robust services activity, reported strong economic growth during the previous fiscal (FY24) and is on track to exceed expectations during the ongoing one (FY25).

India’s GDP expanded 8.2% in FY24, at a faster pace than the 7% reported in FY23, according to data released by the National Statistical Office (NSO).

The Reserve Bank of India (RBI) expects the economy to grow at 7.2% in FY25.

India's economy grew at 6.7% in the April-June quarter (Q1, FY25), following a 7.8% expansion in the previous quarter (Q4, FY24), marking the slowest pace in five quarters, according to data released by the statistics ministry in August.

While the slowdown, termed temporary, has been attributed to a lack of economic momentum during the general elections, muted government capital expenditure, and an uneven monsoon, India's economic growth is expected to pick up in the coming quarters.

Also read:  Indian economy loses sheen compared to four months ago, shows Mint tracker

Asia-Pacific region

Meanwhile, in its latest commentary, Moody's Analytics said it expects the Asia-Pacific region to grow 3.9% in 2024 and 4% in 2025, outpacing the global economy with growth in the region’s developed economies expected to pick up in 2025, offsetting slowing momentum in developing Asia.

"Exports have been a key driver for the region, but growth rests on an unstable footing. Key export drivers such as chips are losing steam. Global goods demand has been soft. And China's policy-led ramp-up in exports has sparked protectionism abroad," it said.

"This leaves domestic demand to pick up the slack, but consumption spending across the region’s largest economies is not back to full strength. Fading inflation and appreciating currencies pave the way for rate cuts, offering a glimmer of hope," it added.