India's Continued Growth Leadership Among G20 Emerging Markets: Moody's

By siliconindia  |  Monday, 11 March 2024, 12:30:34 PM IST

India's Continued Growth Leadership Among G20 Emerging Markets: Moody's
Global rating agency Moody's expects India's economic growth in 2024-25 growth above that of other emerging market G20 peers, given its domestic demand managed to sustain momentum.
India's real GDP growth accelerated to 8.4 per cent year over year in the October-December quarter of 2023, up from upwardly revised prints of 8.1 per cent in July-September and 8.2 per cent in April-June.
The global rating agency Moody's attributed India's firm growth primarily to solid capital expenditure, defying private consumption which remained 'sluggish' amid still-weak rural demand.
On the supply side, an 11.6 per cent surge in manufacturing output and strong service sector activity more than offset a decline in agricultural output in India, it said.
Even so, it said high-frequency indicators, including expanding Purchasing Managers' Index (PMI), rising auto sales, consumer optimism and double-digit credit growth, suggest that the economy's strong October-December momentum carried into January-March this year.
Moody's, the global rating agency, anticipates that India's economic growth in the 2024-25 fiscal year will outpace that of other emerging market G20 peers, fueled by robust domestic demand. The agency attributes India's impressive growth, reaching 8.4% year-over-year in the October-December 2023 quarter, to solid capital expenditure despite sluggish private consumption, especially in the rural sector.
According to Moody's, the firm growth is primarily driven by a substantial 11.6% surge in manufacturing output and a thriving service sector, which more than compensates for a decline in agricultural output. High-frequency indicators such as an expanding Purchasing Managers' Index (PMI), rising auto sales, consumer optimism, and double-digit credit growth indicate that the strong economic momentum in the last quarter of 2023 continued into the first quarter of 2024.
Moody's Macro Monday report, titled 'G-20 emerging markets are poised for growth stabilization,' highlights that several major emerging markets exhibited resilience in 2023, but growth is expected to slow in 2024 as economies transition to a post-pandemic steady growth path. The report forecasts G20 emerging market growth to stabilize around 4.0% in 2024 and 2025, down from 4.7% in 2023 as global monetary policy gradually normalizes.
Despite acknowledging that growth cycles in India and Indonesia may be at their peak, Moody's expects relatively stable growth close to potential for most G-20 emerging markets in 2024 and 2025. It emphasizes the role of domestic demand as the primary engine of growth in these markets, with India leading the way.
Looking at the policy landscape, Moody's anticipates continuity after the upcoming general election in April-May and a continued focus on infrastructure development in India. The agency forecasts India's real GDP to grow around 6.8% in 2024 and 6.4% in 2025, slightly down from the 7.7% growth recorded in 2023.
India's economy has maintained its status as the fastest-growing major economy, with a robust growth rate of 8.4% in the October-December quarter of the 2023-24 fiscal year. The country has achieved a growth rate of over 7% for the past three years, growing at 7.2% in 2022-23 and 8.7% in 2021-22. India's finance ministry envisions the country becoming the third-largest economy in the world in the next three years, reaching a GDP of USD 5 trillion. Additionally, the ministry asserts India's potential to become a USD 7 trillion economy by 2030.

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