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According to Moody’s, strong manufacturing activity, strong investment, and a rebound in household consumption drove India’s real GDP growth in the second quarter (April–June) of 2024, which was 6.7% year over year.
According to Moody’s Ratings, the Indian economy is in a sweet spot with a combination of strong growth and moderate inflation. The company projects a GDP growth of 7.2 percent in 2024 and 6.6% in 2025.
According to the rating agency’s Global Macro Outlook 2025–2026, the world economy has proven remarkably resilient in recovering from supply chain disruptions during the pandemic, an energy and food crisis following the start of the conflict between Russia and Ukraine, high inflation, and the ensuing tightening of monetary policy.
The report predicted that “the majority of G-20 economies will see consistent growth and continue to benefit from policy easing and supportive commodity prices.”
Changes in US foreign and domestic policies following the election, however, may hasten global economic fragmentation and make continued stabilisation more difficult. The combined and net effects of changes in trade, fiscal, immigration, and regulatory policies will expand the range of outcomes for countries and industries.
According to Moody’s, strong manufacturing activity, strong investment, and a rebound in household consumption drove India’s real GDP growth in the second quarter (April–June) of 2024, which was 6.7% year over year.
High-frequency indicators, including expanding manufacturing and services PMIs, robust credit growth, and consumer optimism, signal steady economic momentum in Q3.
“From a macroeconomic standpoint, the Indian economy is in a sweet spot, with a combination of steady growth and moderate inflation. We predict growth of 7.2 percent in 2024, 6.6 percent in 2025, and 6.5 percent in 2026,” the report stated.
According to Moody’s, household consumption in India is expected to rise due to higher spending during the current holiday season and a steady increase in demand in rural areas brought on by a better outlook for agriculture.
Increased capacity utilisation, a favourable business climate, and the government’s continued emphasis on infrastructure spending should all serve to stimulate private investment.
“A strong external position, ample foreign exchange reserves, and sound economic fundamentals, including healthy corporate and bank balance sheets, also bode well for the growth outlook,” the statement continued.
The disinflation trajectory is still characterised by volatility due to sporadic pressures on food prices.
In October, headline inflation accelerated to 6.2% amid a sharp increase in vegetable prices, breaking through the upper end of the RBI’s 4 percent (+/-2 percent) tolerance band for the first time in over a year.
The RBI stated that “in the upcoming months, as food prices ease amid higher sowing and adequate food grain buffer stocks, inflation should moderate towards the RBI’s target despite the near-term uptick.”
Nevertheless, the RBI’s cautious approach to policy easing is highlighted by the possible risks to inflation posed by increased geopolitical tensions and extreme weather events.
Given the reasonably healthy growth dynamics and inflation risks, the central bank is likely to maintain relatively tight monetary policy settings into the upcoming year, even though it changed its monetary policy stance to neutral in October while maintaining the repo rate at 6.5%.