India will be the fastest growing major economy in world: World Bank

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The World Bank has predicted that India will continue to be the fastest-growing major economy globally, although its growth rate is expected to slow. The June ‘Global Economic Prospects’ report maintained India’s GDP growth forecast at 6.6 percent for the fiscal year 2025. The moderation in growth is attributed to a slowdown in investment from a high base. However, the report states that investment growth is still expected to be stronger than previously anticipated, driven by strong public and private investment.

In April, the World Bank increased its projection for India’s GDP growth to 6.6 percent for the current financial year.

After a robust performance in the fiscal year 2024, the World Bank projects an average growth rate of 6.7 percent annually over the three fiscal years starting from 2025. In the January-March quarter, India’s GDP growth exceeded expectations, reaching 7.8 percent, although it was a decline from 8.4 percent in the previous quarter. For the entire fiscal year 2023-24, GDP growth has been revised upwards to 8.2 percent, according to the Ministry of Statistics and Programme Implementation.

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The Reserve Bank of India, in its recent Monetary Policy announcement, forecasted GDP growth at 7.2 percent for the fiscal year 2025, an increase from the earlier projection of 7 percent.

Global Economic Outlook

According to the World Bank’s latest Global Economic Prospects report, the global economy is showing signs of stabilization in 2024, although the stabilization remains weak compared to historical standards. The report projects global GDP growth to be 2.6 percent for 2024-25, a 20 basis point increase from the previous estimate. Modest growth in trade and investment is expected to contribute to global growth of 2.7 percent in fiscal years 2026 and 2027.

Over the next three years, countries representing over 80 percent of the world’s population and GDP are expected to experience slower growth compared to the pre-pandemic decade.

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South Asia’s Growth and India’s Contribution

India, as the largest economy in South Asia, has significantly contributed to regional growth, particularly through its manufacturing and services sectors, according to the World Bank report. India’s growth rate for the fiscal year 2024 is estimated at 8.2 percent, a notable increase from earlier projections. The country’s economic growth has been driven by its industrial and services sectors, which have offset a slowdown in agricultural production caused by monsoon disruptions. Domestic demand remains strong, supported by infrastructure investments.

However, inflation remains elevated in other parts of the region, driven by high food prices and increased energy costs. In Pakistan, inflation has moderated over the past year, but it remains high.

The fiscal health of South Asian countries is gradually improving, with India projected to decrease its fiscal deficit relative to GDP due to increased revenues from a broadened tax base. Trade deficits are narrowing, particularly in India, contributing to overall economic stability in the South Asia region.

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Outlook for South Asia

In the South Asia region, GDP growth is projected to decrease from 6.6 percent in 2023 to 6.2 percent in 2024, mainly due to a slowdown in India. However, steady growth in India is expected to keep the region’s growth rate at 6.2 percent in 2025-26. Other economies in the region, such as Bangladesh, are expected to maintain robust growth, albeit at a slower pace, while growth in Pakistan and Sri Lanka is anticipated to strengthen.

The World Bank notes that risks to this outlook are tilted to the downside, including disruptions in commodity markets, fiscal consolidations, financial instability, severe weather events, and slower-than-expected growth in China and Europe.

Poverty and Inflation Outlook

Per capita income growth in the South Asian region is expected to decrease from 5.6 percent in 2023 to 5.1 percent in 2024-25, with a slight increase to 5.2 percent in 2026. The World Bank highlights that while this indicates a decline in poverty, the rate of poverty reduction outside India in 2024-25 is slower than initially projected. This slower pace is attributed to weaker-than-expected growth in private consumption and fiscal adjustments that may reduce household income.

The World Bank projects global inflation to moderate, but more slowly than previously expected, averaging 3.5 percent this year. Due to ongoing inflationary pressures, central banks in advanced and emerging market economies are expected to be cautious about easing monetary policy.

Global Outlook and Cooperation

The global economic outlook remains subdued by historical standards, with risks including geopolitical tensions, trade fragmentation, higher interest rates, and climate-related disasters. The World Bank emphasizes the importance of global cooperation in safeguarding trade, supporting green and digital transitions, delivering debt relief, and improving food security.

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