Moody's has revised its GDP growth projections for India, increasing its estimate for FY2025 to 7.2% from a previous forecast of 6.8%. The agency also upgraded its 2025 growth estimate to 6.6% from 6.4%.
In July, Moody's had maintained India's economic growth forecast for 2024 at 6.8% and predicted a 6.5% growth rate for 2025. However, recent adjustments reflect expectations of robust, broad-based growth.
The rating agency noted that the revisions are based on strong performance across sectors. India’s economy expanded by 7.8% year-on-year in the first quarter of 2024, despite tight monetary policies and ongoing fiscal consolidation efforts.
Both the industrial and services sectors have performed well, with the services PMI consistently above 60 since the start of the year.
Moody's highlighted that household consumption is likely to rise as inflation moves towards the Reserve Bank of India's target. The report also observed signs of revived rural demand, driven by a strong monsoon and easing inflation, which fell to 3.5% in July from 5.1% in June.
Looking ahead, Moody's emphasised that maintaining a growth rate of 6%-7% will depend on leveraging India’s young workforce.
With a median age of 28 and a significant portion of the population in the working-age bracket, the country faces a key opportunity to drive growth through effective employment and skill development policies.
The report also noted improvements in rural demand and agricultural prospects due to favourable rainfall, alongside healthier corporate and bank balance sheets.
The expansion of the capital expenditure cycle, coupled with increased business sentiment and ongoing government investment in infrastructure, supports a positive outlook for India’s manufacturing sector, despite recent modest growth.
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