Domestic demand to keep India's growth above other G20 emerging markets: Moody's

New Delhi [India], March 11 : Global rating agency Moody's expects India's economic growth in 2024-25 growth above that of other emerging market G20 peers, given its domestic demand managed to sustain momentum.
India's real GDP growth accelerated to 8.4 per cent year over year in the October-December quarter of 2023, up from upwardly revised prints of 8.1 per cent in July-September and 8.2 per cent in April-June.
The global rating agency Moody's attributed India's firm growth primarily to solid capital expenditure, defying private consumption which remained "sluggish" amid still-weak rural demand.
On the supply side, an 11.6 per cent surge in manufacturing output and strong service sector activity more than offset a decline in agricultural output in India, it said.
Even so, it said high-frequency indicators, including expanding Purchasing Managers' Index (PMI), rising auto sales, consumer optimism and double-digit credit growth, suggest that the economy's strong October-December momentum carried into January-March this year.
"Some of the large emerging market (EMs) countries stood out in 2023 for their resilient economies amid high-interest rates, exchange rate volatility, subdued capital flows and muted external demand. This year, we expect growth to slow across several major EMs as the economies transition to a post-pandemic steady growth path," Moody's said in its Macro Monday report, chaptered 'G-20 emerging markets are poised for growth stabilization'.
In its recently published Global Macro Outlook, it forecasted G20 emerging market growth to stabilize around 4.0 per cent in 2024 and 2025, down from 4.7 per cent in 2023 as global monetary policy gradually normalises.
On an annual basis, domestic demand was the primary engine of growth in several G20 emerging markets.
"We believe growth cycles in India and Indonesia are at their peak, Brazil and Mexico are likely past their peak, and South Africa's growth has likely troughed. Nevertheless, we expect relatively stable growth at close to potential in 2024 and 2025 for most G-20 EMs."
On the policy side, the rating agency expects continuity after the general election in April-May and continued focus on infrastructure development. It forecasts India's real GDP to grow about 6.8 per cent in 2024 and 6.4 per cent in 2025, from 7.7 per cent in 2023.
India's GDP grew at a massive 8.4 per cent during the October-December quarter of the current financial year 2023-24 and the country continued to remain the fastest-growing major economy. The Indian economy grew 7.8 per cent and 7.6 per cent during the preceding two quarters - April-June and July-September.
The strength of domestic demand has driven the economy to a 7 per cent plus growth rate in the last three years. India's economy grew 7.2 per cent in 2022-23 and 8.7 per cent in 2021-22, respectively.
In the next three years, India is expected to become the third-largest economy in the world, with a GDP of USD 5 trillion. India can aspire to become a USD 7 trillion economy in the next six to seven years (by 2030), India's finance ministry recently asserted.