India’s has been one of the fastest growing economies since decades and yet again India has emerged as the fastest growing economy amongst the G20 nations in 2024. In the preceding three quarters, the Indian economy registered growth rates of 7.8 percent in Q1, 7.6 percent in Q2, and 8.4 percent in Q3.
Finance Minister Nirmala Sitharaman also expressed during an event in Mumbai that India is projected to achieve growth exceeding 8 percent in the January-March quarter of 2024. Additionally, she highlighted that India has ascended to become the world’s fifth-largest economy and reaffirmed the Modi government’s commitment to elevate it to the third-largest economy by 2027.
The Q3 growth rate of 8.4 percent has exceeded anticipated levels, leading to several institutions revising their GDP growth forecasts for India upward. The latest revision comes from Goldman Sachs, which has increased its 2024 growth projections for India to 6.6 percent, marking a 10 basis point enhancement from its earlier forecast.
Most of the Top rating agencies such as S&P, Morgan Stanley and Moody’s have revised the numbers for Indias growth projections and have proposed and upward movement. S&P has adjusted India’s growth forecasts from 6.4 percent to 6.8 percent, while Morgan Stanley has revised theirs from 6.1 percent to 6.8 percent. Additionally, Moody’s has raised its projection from 6.6 percent to 8 percent for the current fiscal year.
The growth projections are at the backdrop of countries robust mannufacturing activity and infrastructural spending. The global and domestic outlook also remains optimistic towards investment opportunities in the country.
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Moody predicts that India will lead as the fastest-growing economy among the G-20 nations, driven by robust government spending and domestic consumption. Over the years, the Modi government has significantly increased capital expenditure, from 2 percent of GDP nine years ago to 3.8 percent in the 2024 interim budget, marking a nearly 4.5-fold rise since 2014-15.
In the recent interim budget on February 1, 2024, the government allocated Rs 11.11 lakh crore for capital expenditure, reflecting an 11.1 percent increase from the previous budget. This follows a substantial 33 percent increase in CAPEX to Rs 10 lakh crore in the 2023 budget.
S&P has revised its growth forecast for India upwards for 2024, citing strong momentum at the year’s outset, an improving global economic outlook, and expected easing of domestic financial conditions. The firm now projects India’s FY24 growth at 7.3 percent, up from the earlier 6.9 percent. It also expects inflation to decline to 5.1 percent in FY25 from the previous estimate of 5.6 percent, with an average of 5.7 percent in FY24.
Despite the government’s latest forecast of 7.6 percent growth in FY24, the actual growth figures of the preceding three quarters indicate an expansion of 8.2 percent. Additionally, Finance Minister’s statement about GDP growth surpassing 8 percent provides impetus for rating agencies to reconsider India’s growth trajectory.
