Indian economy on a strong footing! The World Bank has revised upwards its projection for India’s economic growth in the current fiscal year, increasing it to 7% from its previous estimate of 6.6%.
The Indian economy grew at 6.7% in the first quarter of FY 2024-25, according to government data last week. The slowdown was attributed to reduced government expenditure during the period of national elections.
Despite this, India retained its status as the world’s fastest-growing major economy, surpassing China’s 4.7% growth rate in the corresponding period.
Economic experts predict that the slowdown will be temporary, as declining inflation rates and heightened government spending are likely to stimulate growth in the forthcoming months.
The Gross Value Added (GVA), which economists consider a more accurate indicator of economic growth, showed an increase of 6.8% in the April-June quarter compared to the same period last year. This marks an improvement from the 6.3% GVA growth recorded in the previous quarter.
Last week, Moody’s also revised its growth forecast for India, projecting a higher GDP growth rate for 2024 and 2025. The agency cited indications of strengthening rural demand as the primary reason behind the upward revision.
According to the revised estimates, India’s economy is expected to grow by 7.2% in 2024, up from the previous projection of 6.8%. Similarly, the growth forecast for 2025 has been raised to 6.6% from the earlier estimate of 6.4%. Moody’s stated, “These forecast changes assume strong broad-based growth and we recognize potentially higher forecasts if the cyclical momentum, especially for private consumption, gains more traction.”
The agency also highlighted the robust performance of both the industrial and services sectors in India. It pointed out that the services Purchasing Managers’ Index (PMI) has consistently remained above 60 since the beginning of the year, indicating a strong expansion in the sector.
Additionally, Fitch, a prominent credit rating agency, has maintained India’s long-term foreign currency issuer rating at ‘BBB-‘ with a stable outlook. The decision was based on the country’s robust medium-term growth prospects, which are expected to continue driving improvements in key structural aspects of its credit profile. These improvements include India’s increasing share of global GDP and its strong external finance position.
The agency also noted that India’s fiscal credibility has been bolstered by meeting deficit targets, coupled with increased transparency and healthy revenues. These factors have raised the probability of a moderate decline in government debt over the medium term, further supporting the stable outlook for the country’s credit rating.
