India’s economic growth estimate has been upgraded by the World Bank to 6.6% for FY25, compared to its last forecast of 6.4%, which indicated a more optimistic view. This review is based on the estimation of 7.5% in FY24 against the National Statistical Office’s projection of 7.6%. The latest bi-annual South Asia Development Update by the World Bank attributes this positive outlook to “upward revisions to investment growth” in India, reflecting an upward revision in investment growth by India as per the World Bank’s latest bi-annual South Asia Development Update. In line with this fiscal year, this report highlights a strong Q3 of FY23 as being responsible for that.
Moderate Growth Expected in FY25 On the other hand, although analysis from The World Bank expects Indian economy will be doing well during FY24; it foresees some moderation to about 6.6% during FY25. Slowdown in investments relative to prior year’s pace would result into such deceleration probably because worsened rates of investment are likely as compared to elevated ones seen last year.
According to the report, policymakers will have more space to adjust financial conditions as inflationary forces weaken. Over the next several years, strong economic growth and efforts to consolidate finances are expected to play a role in reducing the fiscal deficit and government debt, the report noted. Since mid-2023 when there was a spike, retail inflation has been within Reserve Bank of India’s target range of 2–6% and rate policy remains unchanged since February 2023. However, food prices have remained high partly due to El Niño-induced poor harvests.
Consumer price inflation stood at 5.09% in February against January’s reading of 5.1%. Monetary Policy Committee meeting commencing on April 3 is anticipated by analysts not to raise repo rates because of stubborn inflation; although they expect it should subside in coming months due to base effects as well as falling commodity prices. On April 5, the RBI will issue its first monetary policy for this fiscal year with updated GDP growth and retail inflation forecasts for up till FY24. Official data shows that Indian economy expanded by 8.4% in Q3FY23 and is projected to grow at 7.6% in FY24.
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Strong Services and Industry Sectors
Even as there are fears of a slight slowdown, the World Bank report is optimistic about India’s economic sectors. It anticipates that both the services and industry sectors will continue to exhibit strong growth momentum. Particularly noteworthy is the report’s focus on the building and real estate industries, which will help to shore up industry resilience.
India stands out among its South Asian counterparts with robust economic activity. In fact, the country’s annual GDP growth rate for 2024 has been revised upwards to 6.0% primarily on account of India’s excellent performance. Further, Pakistan and Sri Lanka have also observed recoveries which compound this growth path with their robust economic activity accompanying that of India.
The future looks bright according to The World Bank, which recognizes that India can grow further. The bank highlights the beginning of a new decade of substantial government expenditure implying continued good growth rates over time.The outcome will be positive implications for Indian development and prosperity in terms of their economy.
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