©Reuters. A worker sleeps on bags as traffic passes him at a wholesale market in the old neighborhoods of Delhi, India, January 7, 2020. REUTERS/Anushree Fadnavis/File Photo
MUMBAI (Reuters) – Moody’s (NYSE:) Investor Service sharply raised its gross domestic product (GDP) forecast for India on Monday, following strong momentum in the South Asian economy in recent quarters, which it said The rating agency will continue in 2024.
“The Indian economy performed well and stronger-than-expected data in 2023 led us to increase our growth estimate for 2024 from 6.1% to 6.8%,” Moody’s said. “India is likely to remain the fastest growing economy among the G-20 economies over our forecast horizon.”
In the last three months of 2023, the Indian economy grew at the fastest pace in the last three months of 2023, led by strong manufacturing and construction activity, recording growth of 8.4%, faster than 6.6% estimated by economists.
High-frequency indicators show the economy’s strong momentum in the third and fourth quarters has continued into the first quarter of the current calendar year, Moody’s said.
“Strong goods and services tax collections, rising auto sales, consumer optimism and double-digit credit growth suggest urban consumption demand remains resilient,” he added. “On the supply side, the expansion of manufacturing and services PMI confirms solid economic dynamics.”
The ratings agency said it expects policy continuity after a general election due in May and a continued focus on infrastructure development.
While private industrial capital spending has been slow to recover, it is expected to grow with the continued benefits of supply chain diversification and investor response to the government’s plan to revive major manufacturing industries.
Increasing capacity utilisation, robust credit growth and optimistic business sentiment point to an improving outlook for private investment, he added.
Headline inflation in January fell to 5.1% from 5.7% the previous month, but remains well above the central bank’s 4% target.
“Given strong growth dynamics and inflation above the 4.0% target, we do not expect monetary policy easing anytime soon,” Moody’s said.