Moody’s Retains India’s Economic Growth Forecast at 6.7 Percent in 2023
In the face of weak exports and a challenging global economic outlook, Moody’s Investors Service has chosen to maintain its prediction for India’s economic growth in 2023 at 6.7 per cent. The company stated that robust domestic demand is expected to serve as the main driver of growth in the near future.
Moody’s Global Macroeconomic Outlook 2024-25 report projected India’s real GDP to grow around 6.7 per cent in 2023, 6.1 per cent in 2024, and 6.3 per cent in 2025. The report highlighted the country’s 7.8 per cent year-over-year increase in real GDP in the June quarter, bolstered a 6 per cent rise in household consumption along with strong capital expenditure and service sector activity.
The report also indicated that high-frequency indicators point to the strong momentum of the economy in the July-September period. Factors such as robust goods and services tax collections, surging auto sales, rising consumer optimism, and double-digit credit growth contribute to the sustained growth.
Moody’s identified the resilience of urban consumption demand, particularly during the ongoing festive season, while also noting the vulnerability of rural demand to unpredictable monsoons. On the supply side, the report pointed to expanding manufacturing and services PMIs and healthy core industries’ output growth as evidence of a robust economic condition.
The report emphasized that, in light of weak exports, strong domestic demand is expected to sustain growth in the near term. The trajectory of inflation and the delayed impact of the RBI’s monetary policy tightening will also influence domestic demand dynamics beyond the festive season, according to Moody’s. Additionally, core inflation moderated to 4.5 per cent in September, down from 4.8 per cent in August, and the RBI held the repo rate steady at 6.5 per cent for the fourth consecutive meeting in October.
Overall, while the report acknowledged the positive trends in India’s economy, it also highlighted the need for continued vigilance, particularly in light of potential spikes in food and energy prices and geopolitical uncertainty. The RBI’s stated inflation target of 4 percent is expected to be maintained, and sub-6 percent inflation prints may not be sufficient to warrant a change in the central bank’s monetary policy stance, Moody’s said.