Moody's Ratings on Friday projected India to grow 6.8 per cent in the current year, followed by 6.5 per cent in 2025, on the back of strong, economic expansion, along with post-election policy continuity.

India's real GDP grew 7.7 per cent in 2023, up from 6.5 per cent in 2022, driven by robust capital spending by the government and strong manufacturing activity.

High-frequency indicators, including robust goods and services tax collections, rising auto sales, consumer optimism and expanding manufacturing and services PMIs, have signalled sustained economic momentum in March and June quarter this year.

"We believe the Indian economy should comfortably register 6-7 per cent annual real GDP growth and we forecast around 6.8 per cent growth," Moody's said in its update to Global Macro Outlook 2024-25.

It said strong, broad-based growth will likely be sustained with post-election policy continuity.

Moody's said this year's interim Budget targets capital expenditure allocation of Rs 11.1 lakh crore, or 3.4 per cent of GDP in 2024-25, 16.9 per cent above the 2023-24 estimates.

"We expect policy continuity after the general election and continued focus on infrastructure development," it said.

Private industrial capital spending is also set to pick up with ongoing supply chain diversification and the government's production linked incentive (PLI) scheme to boost targeted manufacturing industries, Moody's Ratings added.

Companies have invested around Rs 1.07 trillion through December 2023 across the 14 sectors covered under the PLI scheme, with exports surpassing Rs 3.40 trillion since the scheme's implementation, as per government data.

"Healthy corporate and bank balance sheets, rising capacity utilisation and upbeat business sentiment also point to an improving private investment outlook," it added.

Although sporadic food price pressures continue to inject volatility in the inflation trajectory, headline and core inflation eased to 4.8 per cent and 3.2 per cent, respectively, in April, down sharply from their respective 2022 peaks of 7.8 per cent and 7.1 per cent.

The RBI in April held the repo rate steady at 6.5 per cent, unchanged since February 2023.

"Given the solid growth dynamics and inflation above the 4 per cent target, we do not expect policy easing any time soon," Moody's Ratings said.

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