MUMBAI: Moody’s Investor Service sharply raised its gross domestic product (GDP) forecast for India on Monday, following the strong momentum seen in the South Asian economy in recent quarters, which the ratings agency expects will continue into 2024.

“India’s economy has performed well and stronger-than-expected data in 2023 has caused us to raise our 2024 growth estimate to 6.8% from 6.1%,” Moody’s said.

“India is likely to remain the fastest growing among G-20 economies over our forecast horizon.”

India’s economy grew at its fastest pace in one-and-half years in the final three months of 2023, led by strong manufacturing and construction activity, posting growth of 8.4%, which was faster than the 6.6% estimated by economists.

High-frequency indicators show the economy’s strong third and fourth quarter momentum carried into the first quarter of the current calendar year, Moody’s said.

“Robust goods and services tax collections, rising auto sales, consumer optimism and double-digit credit growth suggest urban consumption demand remains resilient,” it added.

“On the supply side, expanding manufacturing and services PMIs add to evidence of solid economic momentum.” The ratings agency said it expects policy continuity after the general election due by May and a continued focus on infrastructure development.

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While private industrial capital spending has been slow to pick up, it is expected to grow with ongoing supply chain diversification benefits and investors’ response to the government’s scheme to boost key manufacturing industries, it said.

Rising capacity utilisation, robust credit growth and upbeat business sentiment point to an improving outlook for private investment, it added.

Headline inflation in January eased to 5.1% from the previous month’s 5.7% but remains well-above the central bank’s 4% target.

“Given the solid growth dynamics and inflation above the 4.0% target, we do not expect policy easing any time soon,” Moody’s said.