Slowing Indian economy to drag APAC's growth in 2025: Moody's Analytics

S&P expects RBI to cut rates next month

Moody’s Analytics on Tuesday said normalising growth in India would drag the Asia Pacific (APAC) region’s performance in 2025 as India’s economy is projected to slow down to 6.5 per cent in 2025 from an estimated 7.1 per cent for 2024.

“In developing Asia, growth will slow to 5.1 per cent in 2024 and 4.9 per cent in 2025. Sluggish momentum in China is one major factor. Weak domestic demand will weaken domestic growth in China to 4.7 per cent in 2024, well behind the official 5 per cent target. In 2025, growth will slow to 4.6 per cent,” the sister arm of Moody’s Ratings.  

 

“Normalising growth in India will also drag on the region’s performance. After a strong post-pandemic rebound of 7.8 per cent in 2023, Indian gross domestic product (GDP) growth will slow to 7.1 per cent in 2024 and 6.5 per cent in 2025,” it said.

Moody’s Analytics revised India's growth forecast for 2024 to 7.1 per cent from 6.8 per cent estimated in June.

However, global credit ratings agency S&P Global on Tuesday retained India’s growth forecast at 6.8 per cent for 2024-25 and expressed optimism that the Reserve Bank of India (RBI) would start cutting interest rates beginning its October monetary policy review. 

“The RBI considers food inflation a hurdle for rate cuts. It reckons that unless there is a lasting and meaningful decline in the rate at which food prices are increasing, it will be tough to maintain headline inflation at 4 per cent. Our outlook remains unchanged: we expect the RBI to begin cutting rates in October at the earliest and have penciled in two rate cuts this fiscal year,” S&P said in its latest economic outlook for Asia-Pacific. 

Besides, the rating agency also retained its GDP growth forecast for FY26 at 6.9 per cent and said solid growth in India would allow the RBI to focus on bringing inflation in line with its target.

S&P expects inflation to average 4.5 per cent in FY25. Moody’s Analytics predicted better inflation outcomes as well, as it reduced India’s inflation forecast to 4.7 per cent from the 5 per cent predicted earlier.

The RBI's interest rate-setting monetary policy committee (MPC) is set to meet on October 7-9. The central bank has held the benchmark interest rate steady at 6.5 per cent since February 2023 to keep inflation under check.

The RBI has been mandated by the government to keep inflation at 4 per cent with a tolerance band of 2 percentage points on either side.

FY25 forecast (in %)
 

• IMF 7.0
• S&P                                             6.8
• World Bank                                7.0
• RBI 7.2
• Moody's Analytics* 7.1
   

*For calender year 2024

Source: BS Research