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India Emerges as Fastest Growing Economy Among G-20 Nations in 2024, Rating Agencies Upbeat on Growth Prospects

In a remarkable turn of events, India is set to outpace all other G-20 nations in economic growth for the year 2024. With consecutive quarters of impressive expansion, India’s economy surged at rates of 7.8 percent, 7.6 percent, and 8.4 percent in Q1, Q2, and Q3 respectively.

Finance Minister Nirmala Sitharaman, speaking at an event in Mumbai on Saturday, expressed confidence that India’s growth will exceed 8 percent in the January-March quarter of 2024. Notably, India has secured its position as the world’s 5th largest economy, with ambitious plans outlined by the Modi government to elevate it to the 3rd spot by 2027.

The robust 8.4 percent growth in Q3 surpassed expectations, prompting several institutions to revise their GDP growth forecasts for India. Among them, Goldman Sachs stands out, raising its 2024 growth projections to 6.6 percent, marking a 10 basis point improvement from its previous forecast.

Recent revisions from esteemed institutions including S&P, Morgan Stanley, and Moody’s further validate India’s economic prowess. S&P now anticipates India’s growth to reach 6.8 percent, up from 6.4 percent, while Morgan Stanley and Moody’s have revised their projections to 6.8 percent and 8 percent respectively for the current fiscal year.

These upward revisions by rating agencies reflect a blend of global and domestic optimism, fueled by robust manufacturing activity and substantial infrastructure spending. Moody’s anticipates India to lead the G-20 pack in growth, attributing it to strong government expenditure and burgeoning domestic consumption.

Under the Modi government’s stewardship, capital expenditure has witnessed a significant surge, climbing from 2 percent of GDP nine years ago to 3.8 percent in the interim budget of 2024—an increase of about 4.5 times since 2014-15. The allocation of ₹ 11.11 lakh crore towards capital expenditure in the recent interim budget underscores the government’s commitment to economic expansion, marking an 11.1 percent increase from the previous budget.

S&P’s optimistic outlook resonates as they cite a stronger-than-expected momentum at the year’s onset, coupled with an improving global economic environment and anticipated easing of domestic financial conditions, all poised to support economic activity. The firm has raised India’s FY24 forecast to 7.3 percent from 6.9 percent earlier, with a favorable outlook on inflation, projecting a decline to 5.1 percent in FY25 from 5.6 percent.

Despite the government’s latest growth forecast pegging the economy’s expansion at 7.6 percent in FY24, the impressive growth figures of the preceding quarters—8.2 percent in total—bolstered by the Finance Minister’s assertion of GDP growth surpassing 8 percent, hint at a compelling narrative for the rating agencies to recalibrate India’s growth trajectory.

Monika Shanmugam