India’s economy is showing limited signs of slowing as

indicators point to a pick-up in activity at the turn of the

year, after very rapid growth through 2023.

Q4 GDP showed the economy continues to surprise to

the upside and we have adjusted our 2024 forecast

from 5.8% to 6.3% to reflect the strong momentum.

Despite the booming economy, core inflation has

continued to moderate and, while uncertainty remains

around food inflation, we expect headline inflation to

ease by mid-year, creating scope for monetary easing.

Moreover, fiscal consolidation will put the onus on the

Reserve Bank of India to support private sector activity

and, as such, we continue to pencil in the first cut for

June.

However, monetary conditions do not appear

particularly tight and, with strong growth likely to

persist into Q1, the extent to which policymakers will

cut has shrunk in our view. We now see 75bps of cuts

in 2024, with the policy rate settling at 5.75%.

There are also growing risks of a ‘no landing’ scenario

in India given the economy’s resilience. A pick-up in

domestic demand could reverse the progress in core

disinflation and dissuade policymakers from providing

further support for the economy.

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