Moody's raises India's growth projection for 2024, 2025 citing signs of improving rural demand

30 Aug 2024 Evaluate

Citing signs of improving rural demand, Moody's has raised India's growth projection for 2024 and 2025. Moody's now expects India's economy to expand 7.2 per cent in 2024 from 6.8 per cent previously, while growth for 2025 is pegged at 6.6 per cent versus 6.4 per cent. It said ‘These forecast changes assume strong broad-based growth and we recognize potentially higher forecasts if the cyclical momentum, especially for private consumption, gains more traction’.

The agency noted that both industrial and services sectors have demonstrated strong performance, with the services PMI consistently above 60 since the start of the year. It added ‘Household consumption is poised to grow as headline inflation eases toward the RBI's target. Indeed, signs of a revival in rural demand are already emerging, on the back of improving prospects for agricultural output amid above-normal rainfall during the monsoon season’.

The agency also said it expects the capex cycle to gain more steam amid rising capacity utilization, upbeat business sentiment and the government's continued thrust on infrastructure spending. It said over the medium- and longer-term, India's growth prospects depend on how well the country can productively tap its substantial pool of labour. It further said ‘While employment generation and skill development are government priorities, the extent to which India reaps a demographic dividend will depend on whether and how well these policies succeed’. It said ‘Nevertheless, 6 per cent-7 per cent growth should be possible purely on the basis of present conditions.’