In a recent analysis, global rating agency Moody's has projected that India's economic growth for the fiscal year 2024-25 is set to outpace that of other emerging market peers within the G20, largely fueled by robust domestic demand.
India's real GDP surged by 8.4 percent year over year during the October-December quarter of 2023, marking an acceleration from the preceding quarters, which posted upwardly revised figures of 8.1 percent and 8.2 percent for July-September and April-June respectively.
Moody's attributed India's resilient growth trajectory primarily to solid capital expenditure, offsetting sluggish private consumption, particularly in the backdrop of relatively weak rural demand. The agency noted a remarkable 11.6 percent surge in manufacturing output alongside strong activity in the service sector, which more than compensated for a decline in agricultural output.
High-frequency indicators such as expanding Purchasing Managers' Index (PMI), rising auto sales, consumer optimism, and double-digit credit growth indicate that the robust momentum witnessed in the October-December quarter has likely persisted into the first quarter of 2024.
Moody's latest Macro Monday report, titled 'G-20 emerging markets are poised for growth stabilization', anticipates a slowdown in growth across several major emerging markets this year as economies transition towards a post-pandemic steady growth trajectory. According to its Global Macro Outlook, Moody's forecasts G20 emerging market growth to stabilize around 4.0 percent in 2024 and 2025, down from 4.7 percent in 2023, as global monetary policy gradually normalizes.
Highlighting the role of domestic demand as the primary driver of growth across several G20 emerging markets, Moody's suggested that growth cycles in India and Indonesia are currently at their peak, while Brazil and Mexico are likely past theirs. However, it expects relatively stable growth at close to potential levels in 2024 and 2025 for most G20 emerging markets.
Looking ahead, Moody's anticipates policy continuity post the general elections scheduled for April-May, with a continued emphasis on infrastructure development. The agency forecasts India's real GDP to grow by approximately 6.8 percent in 2024 and 6.4 percent in 2025, following a robust expansion of 7.7 percent in 2023.
India's GDP growth during the October-December quarter of the fiscal year 2023-24 underscores its position as the fastest-growing major economy, with an impressive 8.4 percent expansion. This continued a trend of strong growth, with the Indian economy expanding by 7.8 percent and 7.6 percent during the preceding quarters of April-June and July-September respectively.
The sustained strength of domestic demand has been instrumental in propelling India's economy to a growth rate exceeding 7 percent over the past three years. Notably, India's economy grew by 7.2 percent in 2022-23 and by 8.7 percent in 2021-2022.
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