Forecast Revision Signals Positive Trends in Domestic Demand and Investment

Moody’s has raised its growth forecast for India in calendar year 2024 to 7.1%, an increase from its previous estimate of 6.8% made in June. This upward revision highlights India’s potential to outpace the global economy and reflects a broader trend in the Asia-Pacific region.

Steady Growth in the Pipeline

While Moody’s has kept its forecast for India’s growth in 2025 steady at 6.5%, the recent adjustments align with similar optimistic projections from other financial institutions. In September, the World Bank revised its fiscal year 2025 growth estimate to 7%, citing increased government spending on infrastructure, rising household investments, and robust agricultural performance. The International Monetary Fund also upgraded its GDP growth forecast for India to 7% for the current fiscal year.

Factors Driving Economic Expansion

A strong domestic demand, heightened investment, and robust services activity have underpinned India’s impressive economic performance. According to the National Statistical Office, India’s GDP grew by 8.2% in FY24, outperforming the previous year’s 7% growth rate. Despite a slowdown in the April-June quarter of FY25, where GDP growth was reported at 6.7%, experts attribute this dip to temporary factors including electoral dynamics and uneven monsoon conditions.

Regional Growth Dynamics

Moody’s Analytics has indicated that the Asia-Pacific region is expected to grow by 3.9% in 2024 and 4% in 2025, surpassing global growth rates. However, challenges such as a decline in exports, particularly in the semiconductor sector, and global economic uncertainties pose risks to this outlook. As the region grapples with these issues, the focus remains on bolstering domestic demand to sustain growth.

Looking Ahead

The Reserve Bank of India projects a GDP growth rate of 7.2% for FY25, reinforcing the sentiment that India’s economic trajectory remains strong despite recent slowdowns. Analysts predict that as economic momentum builds in the upcoming quarters, India is likely to continue leading the region in growth, making it a focal point for investors and policymakers alike.