Moody's says India’s economy in sweet spot; to clock 7.2% growth this year

PTI New Delhi Moody's Ratings on Friday forecast a 7.2% GDP growth for India in 2024, saying the Indian economy is in a sweet spot, but inflation risks may prompt the RBI to retain a relatively tight monetary policy this year. Moody's said that despite the near-term uptick, retail inflation should moderate toward the Reserve Bank's target in the coming months as food prices ease amid higher sowing and adequate food grain buffer stocks. The retail inflation scaled to a 14-month high of 6.21, breaching the RBI's upper tolerance limit, on a sharp jump in vegetable prices. The agency said sporadic food price pressures continue to inject volatility in the disinflation trajectory.

"Potential risks to inflation from heightened geopolitical tensions and extreme weather events underscore the RBI's cautious approach to policy easing. Although the central bank shifted its monetary policy stance to neutral while keeping the repo rate steady at 6.5% in October, it will likely retain relatively tight monetary policy settings into next year, given the fairly healthy growth dynamics and inflation risks," Moody's said. The RBI's interest ratesetting monetary policy committee is scheduled to meet next month, and with inflation ruling high, it is unlikely that the RBI would cut benchmark interest rates. In its Global Macro Outlook 2025-26, the USbased rating agency said household consumption is poised to grow, fuelled by increased spending during the ongoing festive season and a sustained pickup in rural demand.

Additionally, rising capacity utilisation, upbeat business sentiment and the government's continued thrust on infrastructure spending should support private investment. India's real GDP expanded 6.7% year-overyear in the second quarter of 2024, driven by a revival in household consumption, robust investment, and strong manufacturing activity. There are indications of a steady economic momentum in the July- September quarter as well. "... from a macroeconomic perspective, the Indian economy is in a sweet spot, with the mix of solid growth and moderating inflation.