World Bank Projects Indian Economy to Grow at 7.5% in 2024

Workers standing in the factory of car manufacturer Daimler. The Daimler factory in Chennai has been producing busses and lorries for the brands Mercedes Benz, BharatBenz, and Fuso, Photo: Bernd von Jutrczenka/dpa (Photo by Bernd von Jutrczenka/picture alliance via Getty Images) PICTURE ALLIANCE VIA GETTY IMAGES

The World Bank has announced its revised projections for the Indian economy, forecasting a growth rate of 7.5 per cent in 2024, marking a significant upward revision from its earlier forecast. This growth is expected to be a major driver of South Asia’s economic expansion, which is projected to reach 6.0 per cent in 2024, according to the latest South Asia Development Update released by the World Bank on Tuesday.

Martin Raiser, the World Bank Vice President for South Asia, highlighted the region’s growth prospects but cautioned about potential challenges ahead, stating, “South Asia’s growth prospects remain bright in the short run, but fragile fiscal positions and increasing climate shocks are dark clouds on the horizon.” He emphasized the need for policies aimed at boosting private investment and strengthening employment growth to ensure resilient growth in the region.

Franziska Ohnsorge, World Bank Chief Economist for South Asia, echoed similar sentiments, expressing concern over South Asia’s failure to fully capitalize on its demographic dividend. “This is a missed opportunity,” she remarked, emphasizing the potential for significantly higher output if the region could employ a larger share of its working-age population.

The report indicates that India’s economy is expected to lead the region’s growth trajectory, with output growth projected to reach 7.5% in FY23/24 before moderating to 6.6% over the medium term. The strong performance is attributed to robust activity in services and industry sectors.

“In India, output growth is projected to reach 7.5 percent in FY2023/24 on the back of robust growth in Q3 of FY2023/24,” stated the World Bank report. Martin Raiser, World Bank Vice President for South Asia, reiterated this, emphasizing the positive trajectory of India’s economic growth.

The report also sheds light on the economic situations in other South Asian countries. It anticipates a recovery in Pakistan’s economy, with a growth rate of 2.3% in FY24/25, and a strengthening of output growth in Sri Lanka to 2.5% in 2025.

In addition to growth projections, the report provides insights into various economic indicators. It notes that inflation in India has remained within the Reserve Bank of India’s target range of 2-6 per cent since mid-2023, with financial conditions remaining accommodative. The report also highlights improvements in financial soundness indicators, including a decline in the nonperforming-loan ratio and an increase in regulatory capital.

Furthermore, the report mentions the resilience of India’s financial sector, with domestic credit issuance to the commercial sector witnessing significant growth and foreign reserves rising by 8 percent in the year to January 2024, covering about 11 months of imports.

Despite the optimistic outlook, the report warns of a potential slowdown in growth between FY2023/24 and FY2024/25, mainly due to a deceleration in investment from its elevated pace in the previous year.

As South Asia navigates through both opportunities and challenges, the World Bank emphasizes the importance of implementing policies that enhance resilience and maximize the region’s growth potential.

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