Moody's says Indian economy in a favourable state, forecasts 7.2% growth in CY 2024

In its Global Macro Outlook 2025-26, Moody's highlighted the resilience of the global economy in recovering from pandemic-related supply chain disruptions, the energy and food crises triggered by the Russia-Ukraine war, high inflation, and tightened monetary policies.

“Most G-20 economies will experience steady growth and continue to benefit from policy easing and supportive commodity prices,” the report noted.

However, Moody's cautioned that potential changes in U.S. policies following the upcoming elections could accelerate global economic fragmentation, complicating stabilization efforts. Shifts in trade, fiscal, immigration, and regulatory policies may increase uncertainties for countries and industries.

India's growth drivers

Moody's emphasized India's robust performance, with real GDP expanding 6.7% year-on-year in Q2 2024, driven by a revival in household consumption, strong investment, and buoyant manufacturing activity.

High-frequency indicators, such as expanding manufacturing and services PMIs, strong credit growth, and consumer optimism, point to continued economic momentum in Q3.

Household consumption is expected to grow further, fueled by festive season spending and a rise in rural demand, aided by an improved agricultural outlook. Rising capacity utilization, positive business sentiment, and government infrastructure spending are also likely to support private investment.

“Sound economic fundamentals, including healthy corporate and bank balance sheets, a stronger external position, and ample foreignn exchange reserves also bode well for the growth outlook,” Moody's added.

Inflation and Monetary Policy

While sporadic food price pressures continue to create volatility in disinflation, headline inflation exceeded the RBI’s tolerance band of 4% (+/-2%) in October, rising to 6.2% due to a surge in vegetable prices.

"Despite the near-term uptick, inflation should moderate toward the RBI's target in the coming months as food prices ease amid higher sowing and adequate food grain buffer stocks," the agency said.

The Reserve Bank of India (RBI) has maintained a neutral monetary policy stance, keeping the repo rate steady at 6.5% in October. However, Moody's expects the central bank to retain relatively tight monetary policies in the near term, given India's robust growth dynamics and persistent inflation risks.