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Banking on policy continuity after the Lok Sabha polls and focus on infrastructure development, global credit rating agency Moody’s Investors Service on Monday revised its 2024 growth forecast for the Indian economy to 6.8 per cent, from the 6.1 per cent projection in November last year.
In its latest Global Macro Outlook report, Moody’s asserted that India shall remain the fastest growing economy among the G20 nations amid global and domestic optimism about the country’s showing on the back of robust manufacturing activity and infra spending.
In another bright projection for the Indian economy, the Centre for Monitoring Indian Economy (CMIE) said retail inflation is likely ease to 4.3 per cent in 2024-25, from 5.4 per cent in 2023-24.
This is lower than the Reserve Bank of India’s (RBI’s) consumer price index (CPI) forecast for the next financial year at 4.5 per cent.
The projections by Moody’s and CMIE have come days after the National Statistical Office (NSO), in its second advance estimates data, revised the FY24 growth estimate upward to 7.6 per cent, from the 7.3 per cent projected in January. Defying expectations by a considerable margin, the Indian economy witnessed a six-quarter high growth of 8.4 per cent in Q3FY24.
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Moody’s in its report said: “India’s economy has performed well and stronger-than-expected data in 2023 has caused us to raise our 2024 growth estimate. India is likely to remain the fastest growing among G20 economies over our forecast horizon.”
It also revised upwards its growth projection for 2025 to 6.4 per cent, from the 6.3 per cent projected earlier.
For the upcoming financial year, the RBI has projected growth of 7 per cent, while the State Bank of India (SBI) revised upwards its projection to 8 per cent.
Moody’s report noted that private industrial capital spending has been slow to pick up and is expected to accelerate with ongoing supply chain diversification benefits and investors' response to the government's production-linked incentive (PLI) schemes.
“According to the RBI, total cost of private corporate projects sanctioned by major banks and financial institutions was up 23 per cent during April-December 2023, compared with the same period a year ago, suggesting that the private capex cycle is gaining steam. Additionally, rising capacity utilisation, robust credit growth and upbeat business sentiment point to an improving outlook for private investment,” the report noted.
It further said that robust goods and services tax collections, rising auto sales, consumer optimism, and double-digit credit growth suggest that urban consumption demand remains resilient and the economy's strong growth momentum carries into the first quarter of this calendar year. On the supply side, expanding manufacturing and services PMIs add to evidence of solid economic momentum.
On the monetary policy front, the global rating agency noted that given the solid growth dynamics and inflation remaining above the 4.0 per cent target, policy easing is not expected any time soon. “The RBI kept its policy rate on hold at its February meeting. The RBI will likely keep rates on hold in the coming months given strong growth and firm inflation,” it noted.
CMIE, on the other hand, in its report, said that for lower food inflation, no interruptions in the supply of vegetables, such as potatoes, onions and tomatoes, is a key factor.
In 2022-23, the retail inflation rate had increased by 6.7 per cent, the highest in nine years including 2014-15. This in January this year declined to 5.1 per cent from 5.7 per cent in December 2023. The forecast of 5.4 per cent for 2023-24 would make this the lowest annual inflation rate since the Covid pandemic.
Food and beverages inflation will be at 3.4 per cent in 2024-25, compared to 7.1 per cent in 2023-24 and 6.7 per cent in 2022-23, according to CMIE projections. Clothing and footwear shall record an inflation rate of 4.1 per cent, lower than 4.8 per cent in 2023-24. It was the highest in a decade in 2022-23 at 9.5 per cent.
But some components are likely to buck this trend. According to CMIE’s projections, housing costs are likely to increase with the inflation rate reaching 4.5 per cent in 2024-25. This shall be the highest since 2019-20. Among the different components, the increase in the inflation rate is likely to be the highest for pan, tobacco and intoxicants at 4.7 per cent from 3.9 per cent in 2023-24. It was 2.2 per cent in 2022-23.
The think-tank expects core inflation (excluding food and fuel and light) to reach 5 per cent in 2024-25 from around 4.5 per cent in 2023-24 because of the rise in prices of components in the miscellaneous group.
