Decoding Moody’s Global Macro Outlook: What Does It Reveal About India’s Economic Trajectory

India’s economy is in a “sweet spot” from a macroeconomic outlook, characterised by a mix of solid growth and moderating inflation. according to a recent report by Moody’s. The rating agency projected India’s Gross Domestic Product (GDP) to grow by 7.2 per cent in 2024, followed by 6.6 per cent in 2025 and 6.5 per cent in 2026.

In the second quarter of 2024 (July-September), India’s real GDP expanded 6.7 per cent year-over-year, fueled by a revival in household consumption, robust investment and strong manufacturing activity.

Whereas in the third quarter (October-December), high-frequency indicators – including expanding manufacturing and services PMIs, robust credit growth and consumer optimism – signal steady economic momentum.

The report further highlighted that household spending is expected to remain strong, buoyed by festive season purchases and rising rural demand on the back of an improved agricultural outlook. 

Private investment- one of the key factors impacting GDP- is likely to be supported by increasing capacity utilisation, strong business sentiment, and the government’s ongoing infrastructure investments, said the report.

Moody’s noted that India’s solid economic fundamentals, like healthy corporate and bank balance sheets, a resilient external position, and robust foreign exchange reserves, bolster the outlook.

As per the report, food price volatility remains a concern, as headline inflation recently surged to 6.21 per cent in October due to a spike in vegetable prices, surpassing the Reserve Bank of India’s (RBI) tolerance band of 4 per cent (+/-2 per cent).

Moody’s report suggested that inflation will moderate in the months ahead, aided by higher sowing and ample grain reserves. Yet, the RBI is expected to maintain its cautious stance, keeping interest rates relatively steady given persistent inflationary risks from global tensions and weather uncertainties, it said.

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