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| India Economic Outlook- Optimism Amidst Growth Surge |
Recently, Moody’s, a prominent global credit rating agency, upgraded its forecast for India’s GDP growth in 2024, raising it from 6.1% to 6.8%. This upward revision reflects both global and domestic optimism in the country’s economy, driven by robust manufacturing activity and substantial infrastructure spending.
Moody’s Increased Growth Estimate:
Moody’s raised its 2024 growth estimate for India to 6.8%, citing stronger-than-expected economic data in 2023. This revision underscores India’s resilience amidst global challenges and positions it as the fastest-growing economy among G-20 nations.
Robust Economic Performance:
India’s economy demonstrated remarkable growth in the December quarter (Q3 FY24), expanding by 8.4%, surpassing expectations and allaying concerns of a potential slowdown. The manufacturing, electricity, and construction sectors played pivotal roles in driving this robust performance.
Revised GDP Estimates:
The statistics ministry of the Government of India also revised the GDP growth estimate for FY24 to 7.6%, up from the initial projection of 7.3%. This aligns with the Reserve Bank of India’s forecast of 7% growth for FY24, while the International Monetary Fund predicts a slightly lower growth rate of 6.7%.
Factors Contributing to Growth:
Government Capital Spending and Manufacturing Activity:
Moody’s identified capital spending by the government and strong manufacturing activity as significant contributors to India’s growth in 2023. The agency expects policy continuity post-general election and sustained focus on infrastructure development to further bolster economic growth.
Private Industrial Capital Spending:
Despite slow private industrial capital spending, Moody’s anticipates an uptick driven by ongoing supply chain diversification benefits and positive investor response to the government’s production-linked incentive (PLI) scheme, aimed at boosting key manufacturing industries.
Improving Private Investment Outlook:
Rising capacity utilization, robust credit growth, and optimistic business sentiment suggest an improving outlook for private investment in India, which is expected to sustain the country’s economic momentum.
High-Frequency Indicators and Economic Momentum:
High-frequency indicators suggest that the strong economic momentum witnessed in Q3 and Q4 of the previous year carried into the first quarter of 2024. This sustained growth across various sectors augurs well for India’s economic prospects.
Resilient Urban Consumption Demand:
Moody’s expects India’s urban consumption demand to remain resilient, supported by robust goods and services tax collections, rising auto sales, consumer optimism, and double-digit credit growth.