A recovery in tourism and higher electronics exports will give India and other South Asian economies an additional lift from the pandemic-induced slowdown and its aftershocks, Moody’s Analytics said in a report on Friday.
“India and Southeast Asia have seen some of the largest output losses globally,” said the report, titled ‘Global Outlook: Taking Stock’, “but stronger growth in the latter half of 2023 has allowed them to make back some lost ground”.
Electronic goods, which account for 6% of India’s total export value, clocked significant growth in April-January of FY24, coming in at $22.64 billion from $18.78 billion a year ago. But India’s export values across all commodities declined to $351 billion during April-January from $366 billion a year ago, underlining the impact of the global economic slowdown and the tightening of interest rates in Western countries.
Challenges such as the geopolitical tensions in Ukraine and West Asia, and trade route disruptions in the Red Sea region have exacerbated the situation by increasing oil prices and transport costs.
Meanwhile, the Indian hotel industry is expected to report 7-9% revenue growth in FY25, with occupancy likely to be at decadal highs, ratings agency ICRA said in a recent report. The report added that the sustenance of domestic leisure and business travel, and demand from meetings, incentives, conferences, and exhibitions (MICE) are likely to drive demand in FY25 despite a lull during the Lok Sabha elections.
As things stand, India remains the world’s fastest-growing major economy. In December the Reserve Bank of India (RBI) revised its growth forecast for the economy in FY24 to 7%, up from its previous projection of 6.5%. This revision was due to higher-than-anticipated growth in the first two quarters of the financial year. The union government’s estimate for GDP growth in FY24 is higher at 7.6% on the back of better-than-expected growth during the first three quarters.
Election fever
Meanwhile, Moody’s Analytics expects uncertainties from the flurry of elections this fiscal year, in which half the world’s population will go to the polls. Elections in the US, the UK, India and South Africa will be among the most closely watched, it said in the report.
“Economically, concerns regarding monetary policy missteps loom large. Policy rates in much of the world remain elevated and central banks have signalled that they want to be sure inflation stays on target before easing policy settings,” it said.
“It would not take much to delay rate cuts, which creates a risk that authorities will keep rates too high for too long. At best, this would be an added drag on growth. At worst, it would cause the economy to tip into recession and precipitate broad financial-market dislocations,” it added.
