Moody’s raises India’s GDP growth forecast to 7.2%; Fitch retains rating with stable outlook

new delhi: Moody’s Ratings on Thursday raised India’s GDP growth forecast for 2024 and 2025 calendar year to 7.2 per cent and 6.6 per cent, respectively, on strong broad-based growth.

The ratings agency said that the growth could be higher if the cyclical momentum, especially for private consumption, gains more traction.

“From a macroeconomic perspective, the Indian economy is in a sweet spot, with the mix of solid growth and moderating inflation,” Moody’s Ratings said in its August update of Global Macro Outlook 2024-25. As per the projections, India’s GDP growth would be 7.2 per cent in 2024, up from 6.8 per cent previously. In 2025, the growth is estimated at 6.6 per cent versus our earlier estimate of 6.4 per cent.

“We have raised our real GDP growth projections for the Indian economy for 2024 and 2025...These forecast changes assume strong broad-based growth,” Moody’s said.

The economy expanded 7.8 per cent year-over-year in the first quarter of 2024 despite the persistence of tight monetary policy and demonstrated progress on fiscal consolidation.

Moody’s said signs of a revival in rural demand are already emerging, on the back of improving prospects for agricultural output amid above-normal rainfall during the monsoon season.

Non-financial corporate and bank balance sheets are significantly healthier than before the pandemic, and firms are increasingly tapping equity and bond markets to raise capital.

Moody’s said a recent paper by the RBI also projects a 54 per cent jump in private capex in the current financial year.

Meanwhile, Global rating agency Fitch on Thursday affirmed India’s ‘BBB-’ rating with a stable outlook on strong growth outlook and fiscal credibility.

Fitch said India is set to remain among the fastest-growing sovereigns globally with GDP growth of 7.2 per cent in the current fiscal year and 6.5 per cent in FY26, down from 8.2 per cent in FY24.

“Fitch Ratings has affirmed India’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB-’ with a Stable Outlook,” the global rating agency said in a statement.

Fitch has kept India’s sovereign rating unchanged at ‘BBB-’, the lowest investment grade, since August 2006.

Earlier in May, US-based S&P Global Ratings upped India’s rating outlook to positive from stable, while affirming the ‘BBB-’ rating on improved quality of government expenditure and robust GDP growth.

Fitch in its rating commentary on Thursday said strengthening fiscal credibility from the recent achievement of deficit targets, enhanced transparency and buoyant revenues, have increased the likelihood that government debt can follow a modest downward trend in the medium term.

“India’s ratings are underpinned by its strong medium-term growth outlook, which will continue to drive improvement in structural aspects of its credit profile, including India’s share of GDP in the global economy, as well as its solid external finance position,” the rating agency said.

Fitch, however, flagged debt and debt service burden of India, compared to other ‘BBB’-rated peers. “Lagging structural metrics, including governance indicators and GDP per capita, also weigh on the rating,” it said. Fitch said public infrastructure capex remains a key growth driver and has improved spending quality, helping mitigate the drag from fiscal consolidation.