Moody's Ratings said the Indian economy is in a ‘sweet spot’, with steady growth and moderate inflation, expecting 7.2% GDP growth in 2024 and 6.6% the following year.
According to the rating agency's Global Macro Outlook 2025-26, the global economy has demonstrated remarkable resilience in recovering from supply chain disruptions caused by the pandemic, an energy and food crisis following the start of the Russia-Ukraine war, high inflation, and subsequent monetary policy tightening.
"Most G-20 economies will experience steady growth and continue to benefit from policy easing and supportive commodity prices," it said.
However, post-election changes in US domestic and international policies could potentially accelerate global economic fragmentation, complicating ongoing stabilisation.
The aggregate and net effects of trade, fiscal, immigration and regulatory policy changes will expand the range of outcomes for countries and sectors.
On India, Moody's said the real GDP expanded 6.7 per cent year-over-year in the second quarter (April-June) of 2024, driven by a revival in household consumption, robust investment and strong manufacturing activity.
High-frequency indicators – including expanding manufacturing and services PMIs, robust credit growth and consumer optimism - signal steady economic momentum in Q3.
"Indeed, from a macroeconomic perspective, the Indian economy is in a sweet spot, with the mix of solid growth and moderating inflation. We forecast 7.2 per cent growth for calendar year 2024, followed by 6.6 per cent in 2025 and 6.5 per cent in 2026," it said.
Moody's said household consumption in India is poised to grow, fuelled by increased spending during the ongoing festive season and a sustained pickup in rural demand on the back of an improved agricultural outlook.
The rising capacity utilisation, upbeat business sentiment and the government's continued thrust on infrastructure spending should support private investment.
"Sound economic fundamentals, including healthy corporate and bank balance sheets, a stronger external position, and ample foreign exchange reserves also bode well for the growth outlook," it added.
Sporadic food price pressures continue to inject volatility in the disinflation trajectory.
Headline inflation breached the upper end of the RBI's 4 per cent (+/-2 per cent) tolerance band for the first time in more than a year in October, accelerating to 6.2 per cent amid a sharp jump in vegetable prices.
"Despite the near-term uptick, inflation should moderate towards the RBI's target in the coming months as food prices ease amid higher sowing and adequate food grain buffer stocks," according to the agency.
Nonetheless, possible inflation risks from rising geopolitical tensions and extreme weather events highlight the RBI's cautious approach to policy easing.
Although the RBI altered its monetary policy stance to neutral in October, holding the repo rate stable at 6.5 percent, it is likely to maintain somewhat restrictive monetary policy settings throughout next year, given the reasonably solid economic dynamics and inflation threats.
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