In a recent assessment by a globally recognized financial authority, India’s economic progression is predicted to decelerate in the year 2024. Moody’s Analytics, a key player in economic research, unveiled projections on April 12 that anticipate India’s gross domestic product (GDP) to expand by just 6.1% in the subsequent year. This expected growth rate marks a reduction from the robust 7.7% growth achieved in 2023, indicating a shift in the nation’s economic momentum.
Delving into the causes behind this anticipated slowdown, Moody’s Analytics has highlighted that India’s economic output continues to bear the scars of the COVID-19 pandemic, including the plethora of subsequent challenges it initiated. Illustrating the extensive impact of these events, the report conveyed that India’s current economic size is approximately 4% smaller than what it could have been had the pandemic and ensuing complications — ranging from logistical bottlenecks to international military hostilities — not occurred.
This revelation forms part of a wider analysis titled ‘APAC Outlook: Listening Through the Noise’, where Moody’s Analytics examined the broader Asia-Pacific (APAC) regions’ economic conditions. The report suggested a slightly brighter picture for the region as a whole compared to the global outlook. The APAC economy is set to encounter growth estimated at 3.8% this year, surpassing the global growth forecast of 2.5%.
Despite the evident impediments, the regions of South and Southeast Asia, inclusive of India, are still on track to post some of the most substantial economic gains in 2024. However, it’s important to note that these projections are significantly influenced by a delayed response to post-pandemic economic recovery. India’s growth, although appearing significant, is essentially part of recovering ground lost during the pandemic.
The economic narrative doesn’t end there. Besides GDP growth concerns, inflation remains a critical area of uncertainty, particularly within two of Asia’s leading economies: China and India. For India, the inflation outlook appears precarious; recent rates of consumer price inflation have been oscillating around 5%, just shy of the Reserve Bank of India’s (RBI) maximum threshold of 6% within their target range. Furthermore, the visibility on a trajectory toward cooling inflation remains foggy, as noted in the report authored by Moody’s Analytics’ Senior Economist Stefan Angrick and Associate Economist Jeemin Bang.
Coming on the heels of this report, the Reserve Bank of India, earlier this month, acknowledged the persisting uncertainties over food prices and how they continue to influence the inflation outlook. The RBI maintains a 4.5% projection for retail inflation for the current fiscal year of 2024-25. The central bank also unveiled its quarterly inflation forecasts, expecting a figure of 4.9% for the June quarter and 3.8% for the September quarter, with the last two quarters of the financial year pegged at 4.6% and 4.7%, respectively.
Rome was not built in a day, and similarly, economic recuperation from global events such as the pandemic is a process fraught with unpredictability and challenges. According to RBI, the simmering geopolitical tensions continue to cast a shadow of risk over commodity prices and supply chain stability, two critical components of economic growth.
As India, along with its neighbors, navigates this complex economic landscape, the insights provided by Moody’s Analytics offer a vantage point for policymakers, investors, and business leaders. With careful strategic planning and adaptability, the trajectory of these economies could yet hold positive turns in spite of the headwinds forecasted for the near term.
