Broad-based economic growth and resilience to the energy supply shock from the Iran war prompted credit rating agency Moody's to raise its India growth forecast to 7% from 6.5% for the fiscal year ending March 2027.
Strong consumption, improving investment and sound macroeconomic fundamentals should help India sustain growth near 7% over the medium term, the agency said.
Here are a few details:
Moody's said that India has adjusted to the energy price shock better than previously assumed, helped by its ability to diversify crude and gas supplies and buffer consumers from the immediate price impact through state-backed oil marketing companies and tax cuts.
High frequency indicators including robust capital goods production and imports, accelerating industrial credit growth and rising capacity utilization suggest that India may be at the cusp of a new private capex cycle, per the firm's note.
India's economy expanded 7.8% year-on-year in the April-June quarter, blowing past forecasts as an investment boom and manufacturing strength added to already-solid consumer demand.
Moody's flagged risks to India's growth from rising and broadening price pressures on household consumption, a deficient southwest monsoon hurting farm output and rural demand, and tighter monetary policy potentially delaying a recovery in private investment.
India's inflation data for October is due to released on Thursday with economists polled by Reuters anticipating a rise in headline consumer inflation to 5.93%, near the top of the country's tolerance bank on inflation.
India's central bank delivered its first rate hike in nearly four years in October and markets currently anticipate another 90 bps of policy tightening over the next 12 months.