A Moody’s sign on the 7 World Trade Center tower is photographed in New York.
| Photo Credit: Reuters

Moody’s Investors Service on March 7 said that India’s robust economic growth will continue and its real GDP growth will accelerate to around 8% in 2023-24 from 7% in 2022-23.

“We expect India to be the fastest-growing economy among major G20 countries… Government capital expenditure and strong domestic consumption will underpin India’s economic growth. Moreover, India is poised to benefit from increased global trade and investment opportunities arising from companies’ strategies to diversify away from China,” the rating major said in an outlook report on India’s banking sector.

The firm expects India’s inflation rate to decline to 5.5% in 2023-24 from a peak of 6.7% in 2022-23, and noted that further disinflation will support monetary policy easing, going forward.

Moody’s growth estimate for this year is higher than the 7.6% estimate projected by the National Statistical Office (NSO) in its second advance national income estimates released on February 29. On March 6, Reserve Bank of India Governor Shaktikanta Das said that real GDP growth is likely to be closer to 8% as the NSO’s current estimate of 5.9% GDP growth for the final quarter of the year may be overshot.

Government capital expenditure and strong domestic consumption will underpin India’s economic growth. Moreover, India is poised to benefit from increased global trade and investment opportunities arising from companies’ strategies to diversify away from China, it said.

“We expect India’s inflation rate will decline to 5.5% in 2023-24 from a peak of 6.7 per cent in fiscal 2022-23, and further disinflation will support monetary easing going forward,” it said.

With regard to the banking sector, the report said, non-performing assets (NPAs) will continue to fall as the operating environment improves.

The system wide NPA ratio dropped to 3.2% as at September-end 2023 from a peak of 11.2% at the end of March 2018 because of recoveries and write-offs of legacy problem loans.

Slippage ratios — or the ratios of newly accredited NPAs to total standard assets during a period — will stay low, helped by India’s strong economic growth, it said.

“We expect banks’ Common Equity Tier 1 ratios to decline 50-80 basis points because of increase in risk weights for exposures to NBFCs and unsecured retail loans,” Moody’s said.

(with inputs from PTI)

Global rating agency Moody’s on March 4 raised India’s growth forecast for 2024 calendar year to 6.8%, from 6.1% estimated earlier, on the back of ‘stronger-than-expected’ economic data of 2023 and fading global economic headwinds.

India’s real GDP expanded 8.4% year-over-year in the fourth quarter of calendar year 2023, resulting in a 7.7% growth for full-year 2023.

“Capital spending by the government and strong manufacturing activity have meaningfully contributed to the robust growth outcomes in 2023,” Moody’s Investors Service said.

“With global headwinds fading, the Indian economy should be able to comfortably register 6-7% real GDP growth,” it added.

“India’s economy has performed well and stronger-than-expected data in 2023 has caused us to raise our 2024 growth estimate to 6.8% from 6.1%. India is likely to remain the fastest growing among G20 economies over our forecast horizon,” Moody’s said in its Global Macroeconomic Outlook for 2024. For 2025, the GDP growth is estimated at 6.4%.

The agency said high-frequency indicators show that the economy’s strong September and December quarter momentum carried into the March quarter of 2024.

“Robust goods and services tax collections, rising auto sales, consumer optimism and double-digit credit growth suggest urban consumption demand remains resilient. On the supply side, expanding manufacturing and services PMIs add to evidence of solid economic momentum,” Moody’s said.

This year’s interim Budget targets capital expenditure allocation of ₹11.1 lakh crore or 3.4% of GDP in 2024-25 (fiscal year 2025), 16.9% above the 2023-24 estimates. “We expect policy continuity after the general election and continued focus on infrastructure development,” Moody’s said.

The agency said while private industrial capital spending has been slow to pick up, it is expected to pick up with ongoing supply chain diversification benefits and investors’ response to the government’s Production Linked Incentive scheme to boost key targeted manufacturing industries.

“The year 2024 is an election year for several G20 countries including India, Indonesia, Mexico, South Africa (Ba2 stable), the U.K. and the U.S. Implications of elections can go beyond borders and economic and public policy in today’s increasingly fractious world,” it said.

“Leaders elected this year will influence domestic and foreign policies for the next four to five years. Businesses are accordingly responding to evolving geopolitical dynamics by reorganising supply chains and capital sources,” Moody’s said.

It said geopolitical realities will be influencing international trade flows, capital flows, international migration trends and international organisations in the years to come. Domestically, industrial and trade policies of several countries are intertwined with foreign policy.

Moody’s on August 18 affirmed India’s sovereign rating at ‘Baa3’ with a stable outlook and said high growth will support a gradual increase in income levels, which will further contribute to economic strength.
| Photo Credit: Reuters

Moody’s on August 18 affirmed India’s sovereign rating at ‘Baa3’ with a stable outlook and said high growth will support a gradual increase in income levels, which will further contribute to economic strength.

Moody’s said it expects India’s economic growth to outpace all other G20 economies through at least the next two years, driven by domestic demand.

“Moody’s Investors Service has today affirmed the Government of India’s long-term local and foreign-currency issuer ratings and the local-currency senior unsecured rating atBaa3. Moody’s has also affirmed India’s other short-term local-currency rating at P-3. The outlook remains stable,” it said in a statement.

Baa3 is the lowest investment grade rating.

All three global rating agencies, Fitch, S&P and Moody’s, have the lowest investment grade rating on India, with a stable outlook. The ratings are looked at by investors as a barometer of a country’s creditworthiness and affect borrowing costs.

It said although potential growth has come down in the past 7-10 years, the Indian economy is likely to continue to grow rapidly by international standards.

“High GDP growth will contribute to gradually rising income levels and overall economic resilience. In turn, this will support gradual fiscal consolidation and government debt stabilization, albeit at high levels. In addition, the financial sector continues to strengthen, alleviating much of the economic and contingent liability risks that had previously driven downward rating pressure,” Moody’s said.