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Updated April 3rd, 2024 at 08:38 IST

World Bank upgrades India's growth outlook, projects 7.5% expansion in 2024

Highlighting India's role in the region's economy, the report forecasts an output growth of 7.5% in FY23/24, before moderating to 6.6% over the medium term.

Reported by: Business Desk
Indian economy
Indian economy | Image:Unsplash
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India growth forecast: The World Bank has revised its growth projection for the Indian economy, foreseeing a robust expansion of 7.5 per cent in the fiscal year 2024. This adjustment marks an upward revision of 1.2 per cent from the 6.3 per cent the bank had estimated in its October 2023 report.

The World Bank's latest South Asia Development Update, released on Tuesday, points towards a strong growth trajectory for the region, with South Asia expected to achieve a growth rate of 6.0 per cent in 2024. This growth is primarily attributed to the stellar performance of India, coupled with recoveries in Pakistan and Sri Lanka.

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Highlighting India's pivotal role in the region's economic landscape, the report stresses a forecasted output growth of 7.5 per cent in FY23/24, before moderating to 6.6 per cent over the medium term. The resilience of India's services and industry sectors is anticipated to underpin this growth momentum.

While Bangladesh is projected to experience a 5.7 per cent rise in output in FY24/25, challenges such as high inflation and trade restrictions may temper economic activity.

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Pakistan's economy is poised to rebound with a growth rate of 2.3 per cent in FY24/25 following a contraction in the previous fiscal year, driven by improving business confidence. Similarly, Sri Lanka is expected to witness a strengthening of output growth to 2.5 per cent in 2025, buoyed by modest recoveries in key sectors like reserves, remittances, and tourism.

Commenting on the region's economic outlook, Martin Raiser, World Bank Vice President for South Asia, stressed the importance of implementing policies to bolster private investment and employment growth to ensure resilient growth.

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Franziska Ohnsorge, World Bank Chief Economist for South Asia, highlighted the untapped potential of the region's demographic dividend, suggesting that optimising workforce participation could significantly enhance economic output.

In India, recent economic indicators have been promising, with the economy surpassing expectations in the fourth quarter of 2023, registering a growth rate of 8.4 per cent year-on-year. Strong investment and government consumption have been key drivers of this expansion.

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The report notes that inflation in India has remained within the Reserve Bank of India's target range, while accommodative financial conditions have facilitated credit issuance and improved financial soundness indicators.

Looking ahead, the World Bank anticipates a moderation in India's growth to 6.6 per cent in FY2024/25, primarily attributed to a deceleration in investment. However, robust performance in the services and industry sectors is expected to persist, supported by favorable policy measures.

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Over the medium term, efforts to reduce fiscal deficits and government debt are projected to be reinforced by India's robust output growth, signaling a positive trajectory for the economy.

(With PTI inputs.)

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Published April 3rd, 2024 at 07:56 IST

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