Moody's pegs India's Q1 GDP growth at 6-6.3%, flags fiscal slippage risks

The Indian economy is expected to grow at 6-6.3% in the April-June quarter for 2023-24 amid risks of fiscal slippage from weaker government revenue, the U.S.-based ratings agency Moody's said in its latest note.

Moody's GDP growth estimates for India are lower than the Reserve Bank's projections. The RBI's monetary policy committee (MPC) last week said the real GDP growth for 2023-24 is projected at 6.5%, with Q1 at 8%, Q2 at 6.5%, Q3 at 6%, and Q4 at 5.7%.

Moody's Investors Service Associate Managing Director Gene Fang, in an interview with a national news agency, said the projected growth for the first quarter remains flat as it came out to be 6.1% in the final quarter of the fiscal year 2022-23.

For the full fiscal year 2023-24, Moody's has projected the country to grow at 6.1%; it has pegged India's GDP growth at 6.3% in FY 2024-25.

In its May 2023 analysis, Moody's said India will be the fastest-growing G-20 economy over the next few years, with growing manufacturing and infrastructure sectors.

India's rising per capita and disposable income is in the hands of a growing population, and the government's supportive policies will propel consumption at a compound annual growth rate (CAGR) of 3%-12% until 2030, said Moody's.

Many other global agencies have projected India to grow over 6% in 2023-24. The World Bank has said that India will remain the fastest-growing economy in terms of both aggregate and per capita GDP of the largest emerging market and developing economies. The global financial institution retained its April forecast for India's GDP growth at 6.3% for 2023-24, which, however, is a 0.3 percentage point downward revision from January.

"This slowdown is attributed to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation," the World Bank's Global Economic Prospects report said.

Notably, India's economy grew for the first time in the past nine months to 6.1% in the January-March 2023 period. For the whole fiscal year 2022-23, the GDP growth stood at 7.2%, 20 basis points higher than the Centre's second advance estimates of 7%, which makes it one of the fastest-growing economies in the world.

Similarly, the global financial agency International Monetary Fund in its latest 'Regional Economic Outlook' had earlier said emerging markets and developing economies, including India and China, are expected to account for about 80% of global growth this year and next, with India alone expected to contribute over 15%.

The report said Asia will contribute about 70% of global growth this year, a much greater share than in recent years, and the growth in Asia and the Pacific is forecast to accelerate to 4.6% in 2023 from 3.8% last year. The agency has slashed India's GDP growth forecast to 5.9% for 2023-24, down 20 basis points compared with 6.1% projected earlier.