In its latest report, the World Bank has projected a growth rate of 6.6% for the Indian economy in the fiscal year 2024-25. This forecast marks a slight increase from the previous estimate of 6.4% announced in January as part of the Global Economics Prospects.
According to the South Asia Development update released on Tuesday, the World Bank anticipates a moderation in growth to 6.6% in FY2024/25, following robust public investment in previous years. The report suggests that the deceleration in investment from the elevated pace of the previous year primarily contributes to the expected slowdown, while growth in services and industry, especially construction and real estate activity, is expected to remain strong.
The growth outlook for South Asia as a whole is projected to be 6% in 2024, driven largely by India’s robust growth and recoveries in Pakistan and Sri Lanka. However, the report highlights persistent structural challenges that could hinder sustained growth, including the region’s ability to generate employment and respond to climate shocks.
Inflationary pressures are forecasted to ease, allowing for more policy flexibility in terms of financial conditions. Over the medium term, both the fiscal deficit and government debt are expected to decrease, supported by strong output growth and government consolidation efforts.
Despite retail inflation remaining within the Reserve Bank of India’s target range of 2–6% since mid-2023, analysts expect the RBI to maintain the status quo on the repo rate in the upcoming Monetary Policy Committee meeting, commencing on April 3. However, inflation is expected to moderate in the coming months due to the base effect and softening commodity prices.
The RBI, set to announce the first monetary policy for the current fiscal on April 5, will provide fresh forecasts for GDP growth and retail inflation. Official data indicates that the Indian economy grew by 8.4% in the third quarter of the fiscal year and is estimated to have grown at 7.6% in FY24.
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