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Moody’s Analytics on Tuesday said normalising growth in India will drag the Asia-Pacific (APAC) region’s performance in 2025 as India’s economy is projected to slow down to 6.5 per cent in 2025 from an estimated 7.1 per cent for 2024.
“In developing Asia, growth will slow to 5.1 per cent in 2024 and 4.9 per cent in 2025. Sluggish momentum in China is one major factor. Weak domestic demand will weaken domestic growth in China to 4.7 per cent in 2024, well behind the official 5 per cent target. In 2025, growth will slow to 4.6 per cent. Normalising growth in India will also drag on the region’s performance. After a strong post-pandemic rebound of 7.8 per cent in 2023, Indian GDP growth will slow to 7.1 per cent in 2024 and 6.5 per cent in 2025,” said Moody’s Analytics, the sister arm of Moody’s Ratings.
Moody’s Analytics revised India’s growth forecast for 2024 to 7.1 per cent from 6.8 per cent estimated in June.
However, the global credit ratings agency S&P Global on Tuesday retained India’s growth forecast at 6.8 per cent for 2024-25 and expressed optimism that the Reserve Bank of India (RBI) would start cutting interest rates beginning with its October monetary policy review.
“The RBI considers food inflation a hurdle for rate cuts. It reckons that unless there is a lasting and meaningful decline in the rate at which food prices are increasing, it will be tough to maintain headline inflation at 4 per cent. Our outlook remains unchanged: we expect the RBI to begin cutting rates in October at the earliest and have pencilled in two rate cuts this financial year,” S&P said in its latest economic outlook for Asia-Pacific.
Additionally, the rating agency retained its GDP growth forecast for FY26 at 6.9 per cent and said that solid growth in India will allow the RBI to focus on bringing inflation in line with its target.
S&P expects inflation to average 4.5 per cent in the current financial year. Moody’s Analytics predicted better inflation outcomes as well, as it reduced India’s inflation forecast to 4.7 per cent from the 5 per cent predicted earlier.
The RBI’s interest rate-setting monetary policy committee (MPC) is set to meet on October 7-9. The central bank has held the benchmark interest rate steady at 6.5 per cent since February 2023 to keep inflation under check.
The RBI has been mandated by the government to keep inflation at 4 per cent with a tolerance band of 2 percentage points on either side.
First Published: Sep 24 2024 | 7:49 PM IS
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