The United Nations has revised its growth projections for India’s economy in 2024, now forecasting an expansion of nearly seven percent, primarily driven by robust public investment and resilient private consumption. According to the mid-2024 update of the World Economic Situation and Prospects (WESP) report released on Thursday, India’s GDP is expected to grow by 6.9 percent in 2024, up from the 6.2 percent predicted in January. The growth forecast for 2025 remains unchanged at 6.6 percent.
Key Drivers of Growth
The significant upward revision for 2024 highlights strong public investment and resilient private consumption as the main growth drivers. Despite subdued external demand affecting merchandise exports, the export of pharmaceuticals and chemicals is anticipated to grow robustly. The January 2024 WESP report had initially projected India’s growth at 6.2 percent, citing strong domestic demand and significant growth in the manufacturing and services sectors.
Inflation and Fiscal Policies
Consumer price inflation in India is projected to decrease from 5.6 percent in 2023 to 4.5 percent in 2024, remaining within the central bank’s medium-term target range of two to six percent. Similarly, inflation rates across other South Asian countries are expected to decline further in 2024, ranging from 2.2 percent in the Maldives to 33.6 percent in Iran. Despite this overall moderation, food prices have remained high in early 2024, particularly in Bangladesh and India.
India’s labor market indicators have improved in line with robust economic growth and increased labor force participation. The Indian government remains focused on gradually reducing the fiscal deficit while boosting capital investment.
Regional Economic Outlook
South Asia’s economic outlook is bolstered by India’s strong performance and slight recoveries in Pakistan and Sri Lanka. The region’s GDP is projected to grow by 5.8 percent in 2024, an upward revision of 0.6 percentage points since January, and 5.7 percent in 2025, slightly below the 6.2 percent growth recorded in 2023. However, financial constraints and fiscal and external imbalances will continue to challenge South Asia’s growth prospects. Potential increases in energy prices due to geopolitical tensions and disruptions in the Red Sea also pose risks to the regional economic outlook.
Global Economic Prospects
The world economy is now forecast to grow by 2.7 percent in 2024, an increase of 0.3 percentage points from January’s forecast, and by 2.8 percent in 2025, a slight increase of 0.1 percentage points. These revisions reflect a more positive outlook for the United States, with growth expected at 2.3 percent in 2024, up 0.9 percentage points from January, and several large emerging economies, notably Brazil, India, and Russia.
Several major developing economies, including Indonesia, India, and Mexico, are benefiting from strong domestic and external demand. In contrast, many economies in Africa, Latin America, and the Caribbean face a low-growth trajectory due to high inflation, elevated borrowing costs, persistent exchange rate pressures, and political instability. The ongoing conflicts in Gaza and the Red Sea add further uncertainties to the Middle Eastern economic outlook.
Global Trade and Challenges
Global trade is expected to recover in 2024, initially driven by the destocking of inventory accumulated during the supply-chain disruptions of 2021-22. China’s foreign trade, particularly with Brazil, India, and Russia, has grown faster than expected in early 2024. However, geopolitical tensions in the Middle East, disruptions in the Red Sea, and rising freight costs continue to challenge global trade.
Cautious Optimism Amid Global Risks
The mid-year update notes an improved global economic outlook since January, with major economies avoiding severe downturns and reducing inflation without significant increases in unemployment. Despite this cautious optimism, challenges such as sustained high interest rates, debt sustainability issues, geopolitical tensions, and escalating climate risks threaten growth, particularly for least developed countries and small island developing states.
China’s growth forecast shows a slight uptick to 4.8 percent in 2024 from the 4.7 percent projected in January. However, growth is expected to moderate compared to the 5.2 percent recorded in 2023. While enhanced policy support is likely to boost public infrastructure investments, risks in the property sector remain a significant concern for China’s economic outlook.
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