India’s economic outlook has taken a hit with Moody’s lowering its growth forecast for the fiscal year 2024-25 to 7 pc, down from the 8.2 pc growth witnessed in the previous fiscal year.
This adjustment comes in the wake of a global economic slowdown, alongside domestic economic trends that have been less robust than expected. Moody’s latest report highlights that although India’s growth rate is set to decrease, it still remains strong compared to global averages.
According to the ratings agency, the Indian economy is expected to expand at 7 pc for FY 2024, a slight dip from the previous year.
However, the agency also pointed out that despite the slowdown, India’s economy will continue to show resilience, with sectors such as agriculture and services continuing to contribute positively.
The report notes that India’s GDP per capita, adjusted for purchasing power parity, rose by 11 pc year-on-year, reaching $10,233 in FY 2023.
The revision by Moody’s follows similar actions taken by other economic bodies, such as the Federation of Indian Chambers of Commerce and Industry (FICCI). Last week, FICCI also revised its growth estimate for FY 2024-25 down to 6.4 pc from 7 pc.
FICCI’s Economic Outlook Survey suggested that while expectations were in line with the revised forecast, they indicated a clear slowdown when compared to the previous year’s growth of 8.2 pc.
Furthermore, the Asian Development Bank (ADB) also revised its growth outlook for India, cutting its GDP growth forecast for FY 2024 to 6.5 pc. The ADB cited weaker industrial growth, slower government spending, and subdued private investment as the primary reasons for the downgrade.
The ADB also lowered its projection for FY 2025-26 to 7 pc from an earlier estimate of 7.2 pc, citing tighter monetary policies that have slowed down housing demand and private investment.
Adding to the concerns, India’s fiscal second-quarter growth in FY 2024 showed a slowdown, falling to 5.4 pc, with industrial output rising only 3.6 pc year-on-year. While growth in agriculture (3.5 pc) and services (7.1 pc) remained strong, it was not enough to counterbalance the overall decline in industrial growth.
This reduction in India’s economic growth forecast aligns with the Reserve Bank of India’s earlier decision to lower its projection for FY 2025 to 6.6 pc from 7.2 pc.
The RBI’s forecast also reflects the impact of tight monetary policy, aimed at curbing inflation, and the challenges posed by global geopolitical tensions and adverse weather conditions.
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