Friday

04


October , 2024
World Bank revises raises India’s growth projection
15:34 pm

Tirthankar Mitra


The World Bank has revised its growth forecast for the Indian economy, raising it from an earlier projection of 6.6% to 7% for the current financial year. This upward revision reflects expectations of a strong economic performance, driven by key factors such as private consumption and investment.

The World Bank isn’t alone in its optimism. In their July update, both the World Economic Outlook and the International Monetary Fund (IMF) also raised their growth projections for India to 7%. Similarly, the Asian Development Bank revised its forecast to 7%, while the Reserve Bank of India pegged its projection slightly higher at 7.2%.

According to a World Bank report, the Indian economy remains resilient. However, achieving the ambitious goal of $1 trillion in merchandise exports by 2030 will require strategic diversification and deeper integration into global value chains.

A gradual increase in private investment and a recovery in consump-tion are expected to further boost growth. However, the World Bank highlights that job creation remains a key challenge for India’s economic progress.

India’s urban unem-ployment rate remains high, averaging around 17%. However, the World Bank anticipates a recovery in rural employment, driven by a favorable monsoon season following last year’s El Niño-induced dry spell and heatwave, which should boost farm output, rural incomes, and demand.

Improved monsoon con-ditions and a recovery in private consumption have helped the Indian economy maintain its strength, according to the World Bank’s latest India Development Update (IDU).

India’s strong growth prospects, combined with declining inflation, are expected to further reduce extreme poverty. This outlook is supported by World Bank Country Director for India, Auguste Tano Kouamé, rather than a proclamation from the Indian government.

The World Bank report also highlights improvements in India’s external economic indicators. A significant reduction in the current account deficit signals brighter economic days ahead. Additionally, India’s foreign exchange reserves reached an unprecedented high of $670 billion in early August, providing 11 months of import cover.

Despite navigating a complex global environment, these positive trends reflect India’s growing economic stability. The World Bank projects India’s medium-term income outlook to remain favorable, with growth expected to reach 7% in the fiscal year 2025 and remain robust in the following years.

The country’s debt-to-GDP ratio is expected to decrease from 83.9% in FY24 to 82% in FY25, thanks to fiscal consolidation and strong revenue growth.

To capitalize on these positive developments, the government should prioritize securing more free trade agreements, as now is an opportune moment to do so.

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