India In a Sweet Spot, Says Moody's

As the world looks forward to January 2025, when Donald J. Trump, the victor of the 2024 US presidential election, will take over the Oval Office, developing nations like India also gear up for a time period that could go in any direction.

As these developments brew, one of the leading American rating agencies, Moody's, recently released its forecast for the Indian economy's growth.

According to the rating agency, the Indian economy, which is the 5th largest economy (as per IMF), is set to witness strong growth in 2024. Moody's forcasted a growth rate of 7.2 per cent in the Indian GDP.

As per the RBI's own reports, the inflation rate may increase further with a rate cut or a cut in repo rate pushing itself further away.

Inflation Surges In India

The agency attributed this ostensibly strong growth to strong household consumption and moderating inflation. In addition, the agency also set its forecast for 2025, pegging it at 6.6 per cent, along with 6.5 per cent growth in 2026.

This forecast and the reason attributed come at a time when India's month-on-month inflation rate has seen a steady rise. Just in the past couple of months, the rate of inflation, both at the wholesale (Wholesale Price Index) end and the retail (Consumer Price Index) end, has surged.

The WPI surged progressively from August to September to October, increasing from 1.31 per cent, to 1.84 per cent to 2.36 per cent respectively.

At the consumer end, things were no different; the inflation rate or CPI, rose to 6.21 per cent in October from the 5.49 per cent inflation rate in September. This is beyond the Reserve Bank of India's target of 6 per cent.

Moody's On G20

This rise in inflation, particularly in the big Indian states with large populations, could result in reduced consumption, thereby affecting and placating the aggregate significantly.

As per the RBI's own reports, the inflation rate may increase further with a rate cut or a cut in repo rate pushing itself further away.

In addition to India, Moody's also looked at the growth rate of the biggest economies in the world, the G20 economies. In pursuance to the agency, the G20 economies' growth is expected to decrease from 3.0 per cent in 2023 to 2.8 per cent in 2024.