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Stronger than expected growth! Moody’s raises India’s 2024 GDP forecast sharply

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Confidence booster shot! Moody’s Investor Service has significantly revised its GDP forecast for India on Monday, citing the robust momentum observed in the South Asian economy in recent quarters, which the ratings agency anticipates will persist into 2024.
India’s economy has demonstrated strong performance, and the better-than-anticipated data in 2023 has prompted us to revise our growth projection for 2024 to 6.8% from 6.1%, stated Moody’s. According to Moody’s, India is poised to maintain its position as the fastest-growing economy among G-20 nations throughout the forecast period.
India’s economy recorded its swiftest expansion in eighteen months in the last quarter of 2023, propelled by vigorous manufacturing and construction activities, registering a growth rate of 8.4%, surpassing economists’ consensus estimate of 6.6%.
Moody’s noted that the strong momentum observed in the economy during the third and fourth quarters of the previous year has carried over into the first quarter of the current calendar year, as indicated by high-frequency indicators.
Strong goods and services tax collections, increasing auto sales, positive consumer sentiment, and double-digit credit expansion suggest that urban consumption demand remains resilient, the agency remarked. Furthermore, expanding manufacturing and services Purchasing Managers’ Index (PMI) readings provide additional evidence of robust economic momentum on the supply side, it said.
The ratings agency anticipates policy continuity following the upcoming general election scheduled for May, along with a continued emphasis on infrastructure development.
While private industrial capital expenditure has been slow to rebound, Moody’s predicts growth in this area due to ongoing benefits from supply chain diversification and investor response to government initiatives aimed at bolstering key manufacturing sectors.
Increasing capacity utilization, strong credit expansion, and optimistic business sentiment indicate a positive outlook for private investment, according to Moody’s assessment.
Although headline inflation moderated to 5.1% in January from the previous month’s 5.7%, it remains above the central bank’s target of 4.0%.
Given the robust growth momentum and inflation exceeding the 4.0% target, we do not anticipate any policy easing in the near future, Moody’s concluded.

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