Moody’s, a leading global rating agency, has set a bullish tone for India’s economic outlook by revising its GDP growth forecast for the fiscal year 2023-24 to an impressive 8 per cent. This upgraded projection reflects India’s resilient economic fundamentals, buoyed by robust government expenditure, strong domestic consumption, and strategic positioning to capitalize on shifting global trade dynamics.
Moody’s Upgrades Growth Forecast
The upgraded GDP growth forecast of 8 per cent for the fiscal year ending March 2024 underscores Moody’s confidence in India’s economic trajectory. The agency highlights the pivotal role of government capital expenditure and robust domestic consumption in driving this growth. Additionally, India is poised to benefit from the ongoing global trade shifts, with companies diversifying away from China.
Economic Strength and December Quarter Surge
India’s economic resilience is further underscored by a surprising growth surge of 8.4 per cent in the December quarter, defying concerns of a slowdown. Revised GDP estimates from the National Statistical Office indicate higher growth for the initial quarters of the fiscal year. Key indicators in manufacturing and services sectors position India as one of the fastest-growing major economies, as indicated by the HSBC Flash India Composite Purchasing Managers’ Index (PMI).
Inflation Trends and Monetary Policy
Moody’s anticipates a downward trend in India’s inflation rate, projecting a decline to 5.5 per cent in the fiscal year 2023-24 from the previous fiscal year’s peak of 6.7 per cent. This expectation of disinflation supports the potential for monetary easing. Despite the Reserve Bank of India (RBI) maintaining a steady repo rate at 6.5 per cent, Moody’s notes a cautious approach towards policy easing due to solid growth dynamics and inflation slightly above the 4.0 per cent target.
Banking Sector Outlook
Beyond GDP growth, Moody’s comprehensive report delves into the outlook for India’s banking sector. The agency foresees a continued reduction in non-performing assets (NPAs) as the operating environment improves, with the NPA ratio already witnessing a decline to 3.2 per cent. Moody’s expects banks to maintain strong capitalization, coupled with the ability to raise capital easily if needed. The report also projects healthy levels of profitability for banks, despite a marginal decline in Net Interest Margin due to deposit repricing.
This holistic assessment reinforces the strength and resilience of India’s economic landscape, positioning the country as a key player in the global economic resurgence.
