New Delhi:

Indian economy is in a sweet spot, with a mix of solid growth and moderating inflation, Moody’s Ratings said, forecasting a 7.2 per cent GDP growth in the 2024 calendar year and 6.6 per cent in the next.

In its Global Macro Outlook 2025-26, the rating agency said the global economy has shown remarkable resilience in bouncing back from supply chain disruptions during the pandemic, an energy and food crisis after the Russia-Ukraine war began, high inflation and consequent monetary policy tightening.

“Most G-20 economies will experience steady growth and continue to benefit from policy easing and supportive commodity prices,” it said.

However, post-election changes in US domestic and international policies could potentially accelerate global economic fragmentation, complicating ongoing stabilisation. The aggregate and net effects of trade, fiscal, immigration and regulatory policy changes will expand the range of outcomes for countries and sectors.

On India, Moody’s said the real GDP expanded 6.7 per cent year-over-year in the second quarter (April-June) of 2024, driven by a revival in household consumption, robust investment and strong manufacturing activity.

High-frequency indicators – including expanding manufacturing and services PMIs, robust credit growth and consumer optimism – signal steady economic momentum in Q3.

“Indeed, from a macroeconomic perspective, the Indian economy is in a sweet spot, with the mix of solid growth and moderating inflation. We forecast 7.2 per cent growth for calendar year 2024, followed by 6.6 per cent in 2025 and 6.5 per cent in 2026,” it said.

Moody’s said household consumption in India is poised to grow, fuelled by increased spending during the ongoing festive season and a sustained pickup in rural demand on the back of an improved agricultural outlook.

Additionally, rising capacity utilisation, upbeat business sentiment and the government’s continued thrust on infrastructure spending should support private investment.

“Sound economic fundamentals, including healthy corporate and bank balance sheets, a stronger external position, and ample foreign exchange reserves also bode well for the growth outlook,” it added.

Sporadic food price pressures continue to inject volatility in the disinflation trajectory.

Headline inflation breached the upper end of the RBI’s 4 per cent (+/-2 per cent) tolerance band for the first time in more than a year in October, accelerating to 6.2 per cent amid a sharp jump 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,” the agency said.

Even so, 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 per cent in October, it will likely retain relatively tight monetary policy settings into next year, given the fairly healthy growth dynamics and inflation risks.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Union Finance Minister Nirmala Sitharaman with Deputy Managing Director of the International Monetary Fund Gita Gopinath, during a meeting, in New Delhi, on August 17, 2024.
| Photo Credit: PTI

India has been a laggard among G20 nations in terms of employment generation and the country needs to create an additional 148 million jobs by 2030 given the population growth, IMF’s First Deputy Managing Director Gita Gopinath said on Saturday (August 17, 2024).

India on an average grew at 6.6% for the decade starting 2010 but the employment rate was under 2%, she said at the Delhi School of Economics Diamond Jubilee event here.

So, India’s employment rate is much less when compared to other G20 nations, she said.

“If you look at India’s projections in terms of population growth, India will have to create anywhere between 60 million to 148 million additional jobs cumulatively between now and 2030… we are already in 2024, so in a short period of time we have to create a lot of jobs,” she said.

Given the scale of what is needed, it is going to require basic reforms including land reforms and implementation of labour codes.

To generate more jobs, she said, there is a need for an increase in private investment as it is not commensurate with 7% growth in GDP.

However, she said, public investment is going well but private investment has to improve.

She also said that India should revamp its education system so that it can improve the skill set of its workforce.

Besides, she said, there is a need to further ease of doing business, improve the regulatory environment and broaden the tax base.

‘India will need more reforms to stay on growth path’

India will need to undertake more reforms to be able to continue on the path of raising economic growth and to make sure that enough job creation happens in the country, Ms. Gopinath said.

Ms. Gopinath further said that India will be required to reduce import tariffs if it wants to be an important player in the global supply chains.

“The significant improvements have been made by the government over the years in terms structural reforms.” While noting that the world is in an environment where trade integration has been questioned, Gopinath said it is important for India to remain open for global trade.

“Tariff rates in India are higher than in its other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it is going to require reducing those tariffs,” the eminent economist said.

Gopinath said it is a tremendous aspiration to get to a developed country status but it does not happen automatically, and requires ongoing, consistent efforts, pretty broad scale, across many areas to deliver on that.

“India has grown well in terms of its overall growth rate, and at 7%, it is the fastest growing major economy in the world.

“The question is, how does one keep up the momentum and raise it further so that you can increase per capita incomes in India to get to being an advanced economy,” she said.

Responding to a question on taxation, she said India has parallels with other developing countries, where most of the tax revenue that is collected is indirect taxes and not direct taxes, not in form of income taxes.

“We have been advising other developing countries too, that it is helpful to broaden the personal income tax base and so that you can have more income coming from there,” she said.

Referring to the cut in corporate tax rate by the Modi government, Ms. Gopinath said although it was helpful it is less the tax rate that matters, but what matters is just making sure that there are no loopholes and there are not too many leakages that happen in terms of tax exemptions.

“It is very important to have sufficient progressivity in your tax system…making sure that you are (India) getting enough from your capital gains tax from your capital income tax is going to be critical,” she said.

Gopinath also suggested that now there is better technology to implement property tax and this is again another area where work is needed.

Congress president Mallikarjun Kharge. File
| Photo Credit: ANI

Congress president Mallikarjun Kharge on July 12 said that Prime Minister Narendra Modi “used PR” to keep the government away from basic issues but people were now demanding accountability after the June Lok Sabha poll results.

Mr. Kharge took a swipe at the Prime Minister, saying that while he is holding meetings under the shadow of cameras for the upcoming budget, he must pay attention to the basic economic issues of the country.

In a post in Hindi on X, the Congress president said, “Narendra Modi ji, Your government has ruined the lives of crores of people by pushing them into the pit of unemployment, inflation and inequality.” Listing the “failures” of the government, Kharge said that due to the unemployment rate of 9.2 per cent, the future of the youth is staring at naught.

“For people aged 20-24 years, the unemployment rate has risen to 40%, highlighting the serious crisis in the job market among the youth,” Mr. Kharge said.

The promise of doubling the income of farmers and MSP of cost plus 50 per cent has turned out to be false, he said.

Recently, on the MSP of 14 Kharif crops, the Modi government has again proved that it wants to use the MSP recommendation of the Swaminathan report only as an “election gimmick”, he claimed.

The Congress leader said, “3.84 lakh government jobs have been lost in the 7 PSUs in which the majority of government stake has been sold! This has also led to the loss of jobs for SC, ST, OBC, EWS reserved posts”.

He said 1.25 lakh people have lost government jobs in the 20 top PSUs in which the Modi government has sold a small stake since 2016.

Manufacturing as a percentage of GDP has fallen from 16.5 per cent during the UPA regime to 14.5 per cent during the Modi government, he pointed out.

“Private investment has also fallen drastically in the last 10 years. New private investment plans, which are an important part of GDP, fell to a 20-year low of only ₹44,300 crore between April and June. Last year, private investment of ₹7.9 lakh crore was made during this period,” he said.

Mr. Kharge also alleged that the havoc of inflation is at its peak.

The prices of flour, pulses, rice, milk, sugar, potatoes, tomatoes, onions, and all essential food items are skyrocketing, he noted.

The result is that the household savings of families are at the lowest level in 50 years, he added.

Mr. Kharge said that economic inequality is the highest in 100 years, while wage growth in rural India is negative.

“Unemployment has increased significantly in rural areas and it has now increased from 6.3% in May to 9.3%. The average number of days of workers employed in MNREGA has decreased,” he said.

“Modi ji, It has been 10 years, you used your PR to keep the government away from the basic issues of the people, but after June 2024, this will not work anymore, the public is now demanding accountability,” Mr. Kharge said.

The arbitrary tampering with the country’s economy must now stop, he added.