Moody's Corporation headquarters in Manhattan, New York.
Credit: Reuters
Bengaluru: Global ratings agency Moody’s Ratings, on Thursday, raised India’s growth projection for calendar years 2024 and 2025, citing signs of improving rural demand and moderating inflation, while another agency, Fitch, affirmed the country’s sovereign credit rating.
Moody’s Ratings now expects India’s GDP growth to be 7.2 per cent in 2024 from 6.8 per cent previously, while growth for 2025 is pegged at 6.6 per cent versus 6.4 per cent. It said that the growth could be higher if the cyclical momentum, especially for private consumption, gains more traction.
“From a macroeconomic perspective, the Indian economy is in a sweet spot, with a mix of solid growth and moderating inflation,” the agency said in its August update of Global Macro Outlook 2024-25. “We have raised our real GDP growth projections for the Indian economy for 2024 and 2025. These forecast changes assume strong broad-based growth,” it said.
India’s GDP grew by 7.8 per cent year-over-year in the January-March 2024 quarter despite the persistence of tight monetary policy and demonstrated progress on fiscal consolidation.
Moody’s said signs of a revival in rural demand are already emerging, on the back of improving prospects for agricultural output amid above-normal rainfall during the monsoon season.
Non-financial corporate and bank balance sheets are significantly healthier than before the pandemic, and firms are increasingly tapping equity and bond markets to raise capital.
Meanwhile Fitch, in a report on Thursday, said that India is set to remain among the fastest-growing economies globally. It retained its financial year 2024-25 GDP growth forecast of 7.2 per cent, and 6.5 per cent for 2025-26.
It affirmed India’s long term sovereign rating at ‘BBB-’ with a ‘Stable Outlook’.
“Public infrastructure capex remains a key growth driver and has improved spending quality, helping mitigate the drag from fiscal consolidation. Private investment in real estate is likely to remain strong and there are signs of a nascent pick-up in manufacturing investment,” Fitch said.
Over the medium-term, Fitch said that it estimates India’s potential GDP growth at 6.2 per cent, underpinned by the infrastructure push, strong services sector, and solid private investment outlook.
“The improved health of bank and corporate balance sheets in recent years should pave the way for a positive investment cycle… A solid monsoon should keep food prices contained,” it said.