
On Tuesday, the World Bank retained its economic growth forecast for India in FY25 at 6.4 percent. This stability is attributed to robust domestic demand, increased public infrastructure spending, and a strong expansion in private-sector credit. However, the institution anticipates a potential moderation in private consumption growth due to elevated food inflation and a waning pent-up demand.
In its biannual ‘Global Economic Prospects’ report, the World Bank acknowledged India’s position as the fastest-growing among major economies but cautioned that its post-pandemic recovery might decelerate. The estimated growth for FY24 is 6.3 percent, with a gradual recovery to 6.5 percent in FY26.
The global outlook, according to the multilateral lender, is less optimistic. Hindered by elevated interest rates, persistent inflation, declining trade, and a weakened China, the global economy is anticipated to slow for the third consecutive year in 2024. The World Bank projects a 2.4 percent expansion this year, down from 2.6 percent in 2023, 3 percent in 2022, and 6.2 percent in 2021.
The World Bank’s forecast for India did not incorporate the National Statistical Office’s recent advance estimates, which predicted a 7.3 percent growth for FY24. The report highlighted that investment is expected to slightly decelerate, while remaining robust, supported by increased public investment and improved corporate balance sheets.
Moreover, private consumption growth is likely to taper off due to diminishing pent-up demand and high food price inflation. Government consumption is projected to grow slowly, aligning with efforts to reduce current spending.
Looking ahead, the report suggested that growth in most regions in 2025 might strengthen, coinciding with a global growth uptick. The South Asian region, led by strong growth in India, is expected to remain the fastest-growing.
The report emphasized India’s strong performance in FY24, driven by robust public investment and vibrant services activity. Despite a slowdown in merchandise exports, resilient domestic demand for consumer services and business services exports buoyed the economy.
Regarding inflation, the report noted that headline retail inflation remained within the monetary authorities’ target band of 2-6 percent throughout most of 2023. On the fiscal front, government revenues are expected to benefit from solid corporate profits, with a likely decrease in current expenditures as pandemic-related measures conclude.
However, the report sounded a cautionary note, suggesting that the Lok Sabha elections in 2024 could potentially dampen private sector activity, including foreign investment. Political or social unrest and heightened violence could further disrupt and weaken economic growth under these circumstances.