The World Bank in its recently published South Asia Development Update, Jobs for Resilience, has revised its growth projections for India. It its latest report the World Bank projected Indian economy to grow at 7.5% in FY23-2024, revising its earlier projection by 1.2%.
In the Medium Term
The World Bank projects India’s output growth to reach 7.5 percent in FY23-24 and then moderate to 6.6 percent in FY25. The anticipated downturn is primarily the result of investment slowing down from its higher rate in the prior year. Overall, the activities in the industry and services is anticipated to be remain robust.
According to the report, over the medium term, India’s public debt and fiscal deficit will decline. This is on account of a robust output growth and central government consolidation initiatives.
South Asian Outlook
The World Bank in its report, projected South Asia to remain the world’s fastest growing region for the next two years. Highlighting India’s pivotal role in the regions economic landscape, it projected this region to grow at a rate of 6.1% in 2025.
In FY24-25, it predicts Bangladesh’s output to increase by 5.7% and Pakistan’s economy is projected to grow by 2.3 % during the same period. Experts also project that Sri Lanka’s output growth will pick up steam in 2025, reaching 2.5 %.
Overall, it forecasts a robust growth of 6% of South Asia for FY25. According to the report, India’s impressive performance is the main reason for this development, along with Pakistan’s and Sri Lanka’s recoveries.
Martin Raiser, Vice President for South Asia, World Bank, said that South Asian Growth Prospects remain bright in the short term but the dark clouds of fragile fiscal conditions along with risks associated with climate change are on the horizon. He recommended implementing policies to bolster employment growth and private investment to ensure resilient growth.
India’s Economic Performance
Overall, Indian economy has surpassed expectations in the fourth quarter of 2023, with an 8.4% growth over the previous year thanks to increased government spending and investment.
In February, India’s composite purchasing managers index (PMI) stood at 60.6, significantly higher than the world average of 52.1, suggesting growth. Then inflation has remained within the the Reserve Bank of India’s (RBI) target range of 2-6% since a spike in mid 2023. Moreover, the financial conditions have been accommodative.
Then, December 2023 saw a 14% year-over-year (YoY) increase in domestic credit issuance to the commercial sector. The yearly rise in foreign reserves up to January 2024 was 8%. India’s foreign exchange reserves reached a record high of $642.631 billion as of March 22, 2024, above the previous peak of $642 billion in September 2021. The country holds the fourth-largest foreign exchange reserves in the world after after China, Japan, and Switzerland.