The World Bank has revised its earlier projections and now anticipates the Indian economy to grow at a rate of 7.5% in 2024, reflecting an upward adjustment of 1.2%. The latest South Asia Development Update from the World Bank indicates that South Asia is poised to maintain its position as the world’s fastest-growing region for the next two years, with a projected growth rate of 6.1% in 2025.
The report underscores that the growth momentum in South Asia, particularly in India, alongside recoveries in Pakistan and Sri Lanka, is expected to drive robust economic expansion, reaching 6.0% in 2024. In India, the bulk of the region’s economy, output growth is forecasted to attain 7.5% in FY23/24, followed by a return to 6.6% over the medium term, supported by resilient activity in the services and industry sectors.
Bangladesh is projected to experience a rise in output by 5.7% in FY24/25; however, high inflation and trade restrictions may impede economic activity. Pakistan is expected to witness a growth rebound of 2.3% in FY24/25 following a contraction in the previous fiscal year, driven by improved business confidence. Sri Lanka is anticipated to achieve a growth rate of 2.5% in 2025, supported by modest recoveries in reserves, remittances, and tourism.
Martin Raiser, World Bank Vice President for South Asia, highlights the region’s bright growth prospects in the short term but cautions against fragile fiscal positions and increasing climate shocks. Raiser emphasizes the necessity for policies aimed at boosting private investment and strengthening employment growth to enhance resilience in economic growth.
In India, economic activity surpassed expectations in 2023Q4, with a growth rate of 8.4% from a year ago, supported by rapid increases in investment and government consumption. The composite Purchasing Managers Index (PMI) for India stood at 60.6 in February, well above the global average, signaling expansion. Inflation has remained within the Reserve Bank of India’s target range, and financial conditions remain accommodative, with robust credit issuance and improving financial soundness indicators.
Looking ahead, India’s output growth is projected to reach 7.5% in FY2023/24, moderating to 6.6% in FY2024/25 before picking up in subsequent years. The expected slowdown in growth mainly reflects a deceleration in investment from its elevated pace in the previous year. However, growth in services and industry is anticipated to remain robust, aided by strong construction and real estate activity. Inflationary pressures are expected to ease, providing room for policy adjustments to support financial conditions.
Over the medium term, the fiscal deficit and government debt in India are projected to decline, supported by robust output growth and consolidation efforts by the central government. These projections underscore India’s economic resilience and its potential to sustain growth momentum while addressing underlying challenges.
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