World Bank Raises Forecast For Indian Economy By 20 Basis Points To 6.6 Per Cent In FY25

The report stated that South Asia is expected to remain the fastest-growing region globally for the next two years, with a growth rate of 6.1 per cent in 2024-25 fiscal year

The Indian economy is anticipated to log a growth rate of 7.5 per cent in the 2023–24 fiscal year, the World Bank said in its latest report on Tuesday. The global fiscal body made revisions in its projection for the country and raised the growth rate by 1.2 per cent for FY24. Sharing the growth outlook for FY25, the lender raised the forecast by 20 basis points to 6.6 per cent. 

Sharing the notes in the latest South Asia Development Update, the lender noted that growth in South Asia is projected to stay strong at 6.0 per cent in FY24, helped by robust growth in India and the recoveries seen in Pakistan and South Asia, reported PTI. The report stated that South Asia is expected to remain the fastest-growing region globally for the next two years, with a growth rate of 6.1 per cent in 2024-25 fiscal year. 

Notably, India’s composite purchasing managers index (PMI) in February stood at 60.6, surpassing the global average of 52.1. The report noted that inflation in India remained in the 2-6 per cent target range of the Reserve Bank of India. 

“In India, output growth is projected to reach 7.5 percent in FY2023/24 on the back of robust growth in Q3 of FY2023/24. Growth is expected to moderate to 6.6 percent in FY2024/25 before picking up in subsequent years as a decade of robust public investment yields growth dividends. Growth in services and industry is expected to remain robust, the latter aided by strong construction and real estate activity. Inflationary pressures are expected to subside, creating more policy space for easing financial conditions. Over the medium term, the fiscal deficit and government debt are projected to decline, supported by robust output growth and consolidation efforts by the central government,” the bank noted.

The lender said that it anticipated a slowdown in growth between FY24 and FY25, reflective of a deceleration in investment from its peak pace in the previous year.

The lender in the report said, “In India, which accounts for the bulk of the region’s economy, output growth is expected to reach 7.5% in FY23/24 before returning to 6.6% over the medium term, with activity in services and industry expected to remain robust.”

For Bangladesh’s outlook, the report said that output is estimated to rise by 5.7 per cent in FY25. The economic activity will be dampened by surging inflation and restrictions on trade and foreign exchange. 

In Pakistan, the economy is anticipated to clock a growth rate of 2.3 per cent in FY25 on an improvement in business confidence. Elaborating on the report, Martin Raiser, VP for South Asia, World Bank, said, “South Asia’s growth prospects remain bright in the short run, but fragile fiscal positions and increasing climate shocks are dark clouds on the horizon. To make growth more resilient, countries need to adopt policies to boost private investment and strengthen employment growth.”

The lender noted that the economic activity in India surprised on the upside in the last quarter in 2023, with a growth rate of 8.4 per cent from a year earlier. “The expansion was supported by rapid increases in investment and government consumption. More recent survey data point to continued strong performance,” it added.