World Bank raises India’s growth forecast to 7 pc, up from 6.6 pc

New Delhi, India: The World Bank has pegged the growth forecast for India upwards to 7 percent against the previous estimate of 6.6 percent. This revision has been made on the basis of likely improvement in performance on the back of drivers such as private consumption and investment.

The World Bank had projected India’s economy to grow 7 percent in the current financial year, against the earlier projection of 6.6 percent. This revision is made based on improvements in economic performance, expected to be fired by crucial drivers like private consumption and investment.

A World Bank report also states that the economy is resilient, but such an ambitious target of $1 trillion in merchandise export by 2030 will demand strategic diversification and deeper integration into global value chains.

It is expected to see a gradual rise in private investment and recovery of consumption. Besides, the most significant challenge to the economic growth of India has been the generation of employment opportunities.

The urban unemployment rate remains a source of concern, averaging 17 percent, said the latest report by the World Bank.

While many uncertainties shroud the global economy, the growth prospects for India remain strong nonetheless.

According to the latest India Development Update prepared by the World Bank, the performance of the country’s economy remains buoyant due to favorable monsoon conditions and an upward rebound in private consumption.

Ran Li, senior economist with the World Bank, suggested that such factors have contributed to an increase in the forecast for India’s gross domestic product.

“India’s strong growth prospects, combined with declining inflation, are likely to be an important factor in reducing abject poverty,” said Auguste Tano Kouame, country director of the World Bank in India.

In this backdrop, it becomes imperative for India to tap the global trade potential for accelerating growth further. The export basket for India should therefore be diversified into areas such as textiles, apparel, footwear, electronics, and green technology products to supplement the current stronghold in IT, business services, and pharmaceuticals.

Recent estimates suggest that external economic indicators in India have fared rather well: the current account deficit has seen a significant improvement, with the foreign exchange reserves touching a high of $670.1 billion as early as the first week of August. In fact, this is more than 11 months of import cover, if not more, and is quite impressive.

Positive trends in India, meanwhile, reflect its increasing economic stability in light of the difficult global environment.

Further, the economic outlook continues to remain positive for India at a medium-term pace, with growth set at 7 percent in FY25 while remaining strong over the subsequent years.

The debt-to-GDP ratio is expected to decline from 83.9% in FY24 to 82% by FY27 on the back of solid revenue growth and continuous fiscal consolidation efforts.

The current account deficit is projected to be in the range of 1% and 1.6% of GDP during the period leading up to FY27, according to estimates.