Moody’s Ratings predicted a 7.2 percent GDP growth for India in 2024, highlighting that the country is in an advantageous economic position. However, it cautioned that inflation risks could lead the Reserve Bank of India (RBI) to maintain a relatively tight monetary policy in the near term.
From a macroeconomic standpoint, Moody’s sees India in a “sweet spot” with a healthy combination of solid growth and moderating inflation. The agency forecasts 7.2 percent growth in 2024, followed by 6.6 percent in 2025 and 6.5 percent in 2026. Strong economic fundamentals — such as healthy corporate and bank balance sheets, a strong external position, and ample foreign exchange reserves — also support India’s growth outlook.
Despite a recent uptick in retail inflation, Moody’s expects it to moderate toward the RBI’s target in the coming months as food prices stabilise, thanks to higher sowing and sufficient food grain stocks. Retail inflation surged to a 14-month high of 6.21 percent, driven by a sharp rise in vegetable prices, pushing it past the RBI’s upper tolerance limit.
Moody’s noted that food price volatility could continue to disrupt the disinflation trend. Furthermore, heightened geopolitical tensions and extreme weather events could pose additional inflation risks, which would likely keep the RBI cautious about easing its policy.
While the central bank shifted its stance to neutral and kept the repo rate steady at 6.5 percent in October, Moody’s anticipates that the RBI will maintain a relatively tight monetary policy through 2024, given solid growth prospects and ongoing inflation risks.
With the RBI’s Monetary Policy Committee meeting scheduled for next month and inflation remaining elevated, a rate cut appears unlikely.
In its Global Macro Outlook for 2025-26, Moody’s projected that household consumption will continue to rise, bolstered by increased spending during the ongoing festive season and growing rural demand. Additionally, the government’s infrastructure investment and rising business sentiment should drive private investment.
India’s real GDP grew by 6.7 percent year-on-year (YoY) in Q2 2024, supported by strong household consumption, robust investment, and solid manufacturing activity. This growth momentum is expected to carry into the July-September quarter.
Globally, Moody’s highlighted the resilience of major economies in recovering from the pandemic’s supply chain disruptions, the energy and food crises caused by the Russia-Ukraine war, high inflation and resulting monetary tightening. Most G-20 economies are expected to experience steady growth, benefiting from policy easing and favourable commodity prices.
However, post-election changes in US domestic and international policies could increase global economic fragmentation, complicating ongoing stabilisation efforts, according to Madhavi Bokil, Senior Vice President at Moody’s.
Geopolitical tensions, especially between the US and China, remain significant risks to the global economic outlook. Long-term geoeconomic fragmentation could further complicate global trade and financial connectivity.
Increasing trade protectionism and efforts to strengthen domestic industries in large economies may make external demand less reliable, Moody’s said, noting that economies with strong domestic growth drivers will be more resilient.