Indian economy in sweet spot, 7.2% growth projected in 2024: Moody's

"... from a macroeconomic perspective, the Indian economy is in a sweet spot, with the mix of solid growth and moderating inflation. We forecast 7.2 per cent growth for calendar year 2024, followed by 6.6 per cent in 2025 and 6.5 per cent in 2026," Moody's said.

Despite the near-term uptick, retail inflation should moderate toward the Reserve Bank of India’s (RBI) target in the next few months as food prices ease amid higher sowing and adequate food grain buffer stocks, it said.

Retail inflation rose to a 14-month high of 6.21 per cent, beyond the RBI's upper tolerance limit, on a sharp jump in vegetable prices. Sporadic food price pressures continue to inject volatility in the disinflation trajectory, the rating agency said.

"Potential risks to inflation from heightened geopolitical tensions and extreme weather events underscore the RBI's cautious approach to policy easing. Although the central bank shifted its monetary policy stance to neutral while keeping the repo rate steady at 6.5 per cent in October, it will likely retain relatively tight monetary policy settings into next year, given the fairly healthy growth dynamics and inflation risks," Moody's said.

Household consumption is poised to grow, Moody’s said in its Global Macro Outlook 2025-26. Additionally, rising capacity utilisation, upbeat business sentiment and the government's continued thrust on infrastructure spending should support private investment.

India's real GDP expanded 6.7 per cent year on year in the second quarter this year, driven by a revival in household consumption, robust investment and strong manufacturing activity. There are indications of a steady economic momentum in the July-September quarter as well.

Sound economic fundamentals, including healthy corporate and bank balance sheets, a stronger external position, and ample foreign exchange reserves also bode well for the growth outlook, it added.

Fibre2Fashion News Desk (DS)