The Indian economy is showing promising signs of growth, with projections estimating a rate of 7.1 percent for the fiscal year 2024-25, according to Moody’s Analytics. This positive outlook comes amid global uncertainties, highlighting India’s resilience in navigating challenging economic conditions.
In its recent Asia Pacific outlook, Moody's maintained its growth forecast for India at 6.5 percent for the year 2025, while also predicting a further increase to 6.6 percent in 2026. This consistency in growth forecasts indicates a strong confidence in India's economic trajectory.
Furthermore, Moody's has revised its inflation outlook for the country, lowering it from an earlier estimate of 5 percent to a more favourable 4.7 percent. This adjustment reflects a notable decrease in inflation rates, which remained below 4 percent in both July and August.
Looking ahead, the inflation forecasts for 2025 and 2026 remain steady at 4.5 percent and 4.1 percent, respectively. These figures suggest that while inflation is being managed effectively, the Indian economy is still positioned for growth. In contrast, the broader Asia Pacific region has also seen an upward revision in growth forecasts, with Moody's increasing its 2025 projection from 3.9 percent to 4 percent.
However, the report does caution that the growth trajectory for exports in the region is precarious. Key sectors, particularly semiconductor chips, are showing signs of decline, and there is an overall softness in global goods demand.
Additionally, the surge in exports from China, driven by policy changes, has led to increased protectionist measures in other countries, further complicating the landscape for trade.
In a related update, S&P Global Ratings has retained its growth forecast for India at 6.8 percent for the fiscal year 2024-25. They noted a moderation in GDP growth during the June quarter, attributing this to high interest rates affecting urban demand. S&P also maintained its forecast for the following fiscal year at 6.9 percent.
Amidst these economic forecasts, the Reserve Bank of India (RBI) views food inflation as a significant obstacle to implementing rate cuts. The RBI's current stance indicates that while there may be opportunities for rate reductions, food prices will need to stabilise first.
According to the report, expectations are that the RBI could start reducing interest rates as early as October, with a total of two rate cuts anticipated by the end of the fiscal year in March 2025.
Recent data shows a year-on-year inflation rate of 3.65 percent based on the All India Consumer Price Index (CPI) for August, marking it as the second lowest rate in the past five years. In July, inflation had even dipped below the RBI's medium-term target of 4 percent for the first time, reflecting a positive trend in price stability.
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