World Bank Holds Steady: Maintains India’s FY25 GDP Growth Estimate at 6.4%

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India’s Economic Growth Projections and Global Slowdown: A World Bank Outlook

World Bank Holds Steady: Maintains India's FY25 GDP Growth Estimate at 6.4%
World Bank Holds Steady: Maintains India’s FY25 GDP Growth Estimate at 6.4%

The World Bank has maintained its fiscal year 2025 economic growth projection for India at 6.4%, signifying the nation’s potential to remain the world’s fastest-growing large economy. This optimism is fueled by strong domestic demand, increased public infrastructure spending, and robust private-sector credit growth. Despite this positive outlook, concerns linger about the impact of high food inflation and diminishing pent-up demand on private consumption growth.

In its biannual ‘Global Economic Prospects’ report, the World Bank acknowledged India’s likelihood of sustaining the fastest growth rate among major economies. However, it anticipates a gradual slowdown in India’s post-pandemic recovery, projecting a growth rate of 6.3% in fiscal year 2024, followed by a moderate recovery to 6.5% in fiscal year 2026.

World Bank Holds Steady: Maintains India’s FY25 GDP Growth Estimate at 6.4%


While India’s economic prospects remain promising, the global economic scenario appears less optimistic. The World Bank forecasts a third consecutive year of global economic slowdown in 2024, citing factors such as high interest rates, persistent inflation, declining trade, and a weakened China. The projected global economic expansion for 2024 is 2.4%, down from 2.6% in 2023, 3% in 2022, and 6.2% in 2021, reflecting the gradual easing of the robust recovery from the pandemic-induced recession in 2020.

The World Bank’s report does not account for India’s National Statistical Office’s recent advance estimates, which projected a 7.3% growth rate for India in fiscal year 2024.

According to the report, India’s investment is expected to decelerate slightly, but it will remain robust, supported by increased public investment and improved corporate balance sheets. However, private consumption growth may taper off due to diminishing post-pandemic pent-up demand and persistent high food price inflation, particularly impacting low-income households. The government’s consumption is anticipated to grow slowly in line with efforts to lower current spending.

Looking ahead to calendar year 2025, the report suggests that growth in most regions could strengthen, aligning with an anticipated increase in global growth. The South Asian region, led by robust growth in India, is expected to remain the fastest-growing region.

India’s strong performance in fiscal year 2024 is attributed to robust public investment growth and vibrant services activity. Resilient domestic demand for consumer services and exports of business services played a crucial role, offsetting the slowdown in merchandise exports due to weak external demand.

The report notes that India’s headline retail inflation remained within the monetary authorities’ target band of 2-6% throughout most of 2023, with policy rates unchanged since February 2023. On the fiscal front, solid corporate profits are expected to boost government revenues, and current expenditures are likely to decrease with the conclusion of pandemic-related measures.

However, the report sounds a cautionary note about the Lok Sabha elections scheduled for 2024, highlighting the potential to dampen private sector activity, including foreign investment. Political or social unrest and elevated violence during this period could further disrupt and weaken economic growth.

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