The Indian economy is positioned in a “sweet spot” with a combination of robust growth and moderating inflation, according to Moody’s Ratings. The agency has projected a 7.2% GDP growth for the 2024 calendar year, followed by 6.6% in 2025 and 6.5% in 2026.
In its Global Macro Outlook 2025-26, Moody’s highlighted that the global economy has demonstrated resilience, overcoming challenges like supply chain disruptions during the pandemic, inflationary pressures, and the fallout from the Russia-Ukraine conflict. “Most G-20 economies will experience steady growth and continue to benefit from policy easing and supportive commodity prices,” the report noted.
Consumption, Investments, and Manufacturing
For India, the real GDP grew by 6.7% year-over-year in the second quarter (April-June) of 2024. This growth was attributed to a recovery in household consumption, robust investment, and strong manufacturing activity. High-frequency indicators such as expanding manufacturing and services PMIs, rising consumer confidence, and strong credit growth point toward sustained economic momentum in the third quarter.
“Indeed, from a macroeconomic perspective, the Indian economy is in a sweet spot, with the mix of solid growth and moderating inflation,” the agency said.
The festive season and a revival in rural demand, supported by an improved agricultural outlook, are expected to fuel household consumption. Rising capacity utilisation, positive business sentiment, and the government’s continued focus on infrastructure development are also likely to drive private investment.
Inflation Challenges and RBI’s Policy Stance
Despite the optimistic growth outlook, inflation remains a concern. In October, headline inflation breached the Reserve Bank of India’s (RBI) 4% (+/-2%) tolerance range for the first time in over a year, reaching 6.2% due to a spike in vegetable prices. “Despite the near-term uptick, inflation should moderate toward the RBI’s target in the coming months as food prices ease amid higher sowing and adequate food grain buffer stocks,” Moody’s stated.
However, geopolitical tensions and extreme weather events pose risks to the inflation trajectory. While the RBI has maintained its repo rate at 6.5% and adopted a neutral monetary policy stance, it is expected to retain tight policy settings into next year, balancing healthy growth with inflation risks.
Global Risks
Moody’s also flagged potential risks to global economic stability stemming from policy shifts in the US after its elections. Changes in domestic and international policies could accelerate economic fragmentation worldwide, complicating ongoing stabilisation efforts. “The aggregate and net effects of trade, fiscal, immigration, and regulatory policy changes will expand the range of outcomes for countries and sectors,” it warned.
Strong Fundamentals Bode Well
India’s economic fundamentals remain robust, supported by healthy corporate and bank balance sheets, a stronger external position, and ample foreign exchange reserves. These factors, combined with the government’s infrastructure spending and rising business optimism, are expected to underpin steady growth over the coming years.
While sporadic food price pressures continue to inject volatility, Moody’s maintains that the Indian economy is well-positioned for sustainable growth in the medium term.
