Moody’s, one of the world’s largest rating agencies, has once again expressed confidence in India’s economy. The rating agency Moody’s estimates that India’s growth in the current calendar year 2024 may be 7.1 percent. What is special is that Moody’s revised its estimates. Previously, Moody’s estimate was 6.8 percent. At the same time, Moody’s has not made any changes to India’s outlook for the next calendar year 2025. This means that India’s economic growth next year may be 6.5 percent.
Earlier in September, the World Bank had revised its fiscal year 2025 forecast for India to 6.6 per cent, citing government spending on infrastructure, rising domestic investment in real estate, a better-than-expected monsoon, rising agricultural output and private consumption to rise to 7 per cent. Similarly, in July the International Monetary Fund had raised India’s GDP growth by 20 basis points to 7 per cent in the current financial year (FY25).
Report published by Moody’s
“In developing Asia, growth is set to decelerate from 5.5 per cent in 2023 to 5.1 per cent in 2024 and 4.9 per cent in 2025,” says the Moody’s Analytics report titled ‘APAC Outlook: Two Steps Forward’. Normalisation of growth in India will also impact the performance of this sector. The report says that after 7.8 per cent growth in 2023, India’s GDP growth could decelerate to 7.1 per cent in 2024 and 6.5 per cent in 2025. Driven by good domestic demand, investment growth and robust services activity, the Indian economy recorded strong economic growth during the last financial year (FY24) and is on track to exceed expectations during the current financial year (FY25).
This is the government’s estimate.
According to data released by the National Statistical Office (NSO), India’s GDP grew 8.2 per cent in fiscal year 2024, much better than the 7 per cent in fiscal year 2023. The Reserve Bank of India (RBI) expects the economy to grow at a rate of 7.2 per cent in fiscal year 2025. According to data released by the Ministry of Statistics, India’s economy grew 6.7 per cent in the April-June quarter (Q1, FY25), the lowest in five quarters after a growth of 7.8 per cent in the previous quarter (Q4, FY24). Though the slowdown, which has been termed temporary, has been attributed to lack of economic momentum during the general elections, low government spending and a patchy monsoon, India’s economic growth is expected to pick up in the coming quarters.
S&P made no changes
On the other hand, S&P Global Ratings on Tuesday maintained India’s growth forecast for the current financial year 2024-25 at 6.8 per cent and said it expects the RBI to start cutting interest rates in its October monetary policy review. On the Asia Pacific economic outlook, S&P Global Ratings has maintained the GDP growth rate estimate for the financial year 2025-26 at 6.9 per cent. It said robust growth in India will enable the Reserve Bank of India (RBI) to focus on aligning inflation with its target.
There may be a drop in interest rates
The rating agency said high interest rates in India in the April-June quarter hit urban demand and slowed GDP growth. However, this is in line with our estimate of 6.8 per cent GDP for the full financial year 2024-25. S&P said our outlook remains the same. We expect the RBI to start cutting rates at the earliest in October and plan to cut rates twice in the current financial year (ending March 2025). S&P estimates inflation to average 4.5 per cent in the current financial year.
The Federal Reserve has cut
The Monetary Policy Committee meeting, which sets the RBI’s interest rate, will be held from October 7 to 9. To keep inflation in check, the central bank has kept the policy rate unchanged at 6.5 per cent since February 2023. The Federal Reserve, the US central bank, also reduced its official interest rate by 0.50 per cent. Following this, the RBI is expected to reduce it by 0.25 per cent next month.
