Domestic demand to sustain India’s growth, says Moody’s

New Delhi, November 9

Moody’s Investors Service on Thursday retained India’s economic growth forecast for 2023 at 6.7% and said strong domestic demand will likely sustain the growth in the near term.

With exports remaining weak against an unfavourable global economic backdrop, Moody’s in its Global Macroeconomic Outlook 2024-25 said sustained domestic demand growth is propelling India’s economy.

Macroeconomic Outlook

• India’s real GDP rose 7.8% year-over-year in June quarter, up from 6.1% in March quarter and bolstered by a 6% increase in household consumption and solid capital expenditure and service sector activity
• Moody’s said high-frequency indicators show that the economy’s strong June quarter momentum carried into July-September as well
• With exports remaining weak against an unfavourable global economic backdrop, Moody’s said sustained domestic demand growth is propelling India’s economy

“We expect India’s real GDP to grow about 6.7% in 2023, 6.1% in 2024 and 6.3% in 2025,” Moody’s said.

India’s real GDP rose 7.8% year-over-year in June quarter, up from 6.1% in March quarter and bolstered by a 6% increase in household consumption and solid capital expenditure and service sector activity.

Moody’s said high-frequency indicators show that the economy’s strong June quarter momentum carried into July-September as well.

“Robust goods and services tax collections, surging auto sales, rising consumer optimism and double-digit credit growth suggest urban consumption demand will likely remain resilient amid the ongoing festive season.

However, rural demand, which has shown nascent signs of improvement, remains vulnerable to uneven monsoons that could lower crop yields and farm income,” Moody’s said.

On supply side, expanding manufacturing and services PMIs and healthy core industries’ output growth add to evidence of solid economic momentum, it said.

“With exports remaining weak amid an unfavourable global economic backdrop, strong domestic demand will likely sustain growth in the near term. Domestic demand dynamics beyond the festive season will depend on the trajectory of inflation and the lagged impact of the RBI’s monetary policy tightening,” it said.

Headline inflation in September eased to 5% from 6.8% in the month prior, dropping back within the RBI’s target range.