Moody's, a rating agency, released a positive report on Tuesday, projecting India's economic growth at 6.5% for 2024-25. This rate is expected to be the highest among G-20 developed and emerging economies.
Moody's Report: Moody's latest report expresses optimism regarding the Indian economy. According to the rating agency, India's GDP will grow at a rate of 6.5% in 2024-25, the fastest among other developed and emerging markets in the G-20. Moody's attributes this rapid growth to government tax breaks, RBI's interest rate cuts, and increasing confidence from foreign investors.
Key Drivers of India's Economic Strength
Several key factors underpin India's robust economic growth. According to Moody's, changes to income tax slabs have boosted domestic consumer spending. The zero tax on income up to ₹1.2 million has increased spending, benefiting the national economy.
Furthermore, the Reserve Bank of India (RBI) reduced interest rates by 0.25% in February and another cut is anticipated on April 9th. This move will lower borrowing costs and stimulate economic activity. India's foreign exchange reserves and low external debt provide resilience against global shocks.
Resilience Against US Policies
Moody's also noted that while US policies might cause capital flight from emerging markets, larger economies like India and Brazil possess the strength to navigate this challenge. India's large domestic market, stable monetary policy, and substantial foreign exchange reserves will help insulate it from the impact of US tariff policies.
The report also highlighted that despite increased exports and infrastructure investment in China, domestic demand remains weak. Smaller countries like Argentina and Colombia may be more vulnerable to currency fluctuations against the dollar, impacting their growth.
Potential for Top-3 Economy Status
Moody's believes that b domestic demand, tax reforms, and the RBI's accommodative loan policies will support the Indian economy. Furthermore, increased government infrastructure spending and further RBI interest rate cuts could propel India into the top three global economies by 2025.
