The United Nations has revised upwards its growth projections for India’s economy in 2024, now forecasting an expansion close to seven percent, driven primarily by robust public investment and resilient private consumption.
The mid-2024 update of the World Economic Situation and Prospects (WESP) report, released on Thursday, states, “India’s economy is forecast to expand by 6.9 percent in 2024 and 6.6 percent in 2025, mainly driven by strong public investment and resilient private consumption. Although subdued external demand will continue to weigh on merchandise export growth, pharmaceuticals and chemicals exports are expected to expand strongly.”
This 6.9 percent growth projection marks an upward revision from the 6.2 percent GDP forecast made by the UN in January. The initial WESP 2024 report, launched in January, had projected a 6.2 percent growth for India in 2024, citing robust domestic demand and strong growth in the manufacturing and services sectors.
Consumer price inflation in India is projected to decelerate from 5.6 percent in 2023 to 4.5 percent in 2024, staying within the central bank’s two to six percent medium-term target range. Similarly, inflation rates in other South Asian countries declined in 2023 and are expected to decelerate further in 2024, ranging from 2.2 percent in the Maldives to 33.6 percent in Iran. Despite some moderation, food prices remained elevated in the first quarter of 2024, especially in Bangladesh and India.
In India, labor market indicators have also improved amid robust growth and higher labor force participation. The government remains committed to gradually reducing the fiscal deficit while seeking to increase capital investment.
South Asia’s economic outlook remains strong, supported by India’s robust performance and a slight recovery in Pakistan and Sri Lanka. Regional GDP is projected to grow by 5.8 percent in 2024, an upward revision of 0.6 percentage points since January, and 5.7 percent in 2025, slightly below the 6.2 percent recorded in 2023. However, tight financial conditions and fiscal and external imbalances will continue to weigh on South Asia’s growth performance.
Potential increases in energy prices amid geopolitical tensions and ongoing disruptions in the Red Sea pose risks to the regional economic outlook. The upward revisions reflect a better outlook in the United States, where the latest forecast points to 2.3 percent growth in 2024, and several large emerging economies, notably Brazil, India, and Russia.
The report noted that several large developing economies, including Indonesia, India, and Mexico, are benefiting from strong domestic and external demand. In contrast, many economies in Africa and Latin America are on a low-growth trajectory, facing high inflation, elevated borrowing costs, persistent exchange rate pressures, and lingering political instability. The potential intensification and spread of conflicts in Gaza and the Red Sea add further uncertainties to the near-term outlook for the Middle East.
Global trade is expected to recover in 2024, with an early boost to trade flows attributed to destocking inventory piled up amid supply-chain disruptions in 2021-22. “China’s foreign trade grew faster than expected in the first two months of 2024, driven largely by exports to emerging markets, particularly to Brazil, India, and Russia,” the report said.
However, persistent geopolitical tensions in the Middle East and disruptions in the Red Sea, along with escalating freight costs, continue to pose challenges to global trade. The mid-year update indicates that global economic prospects have improved since January, with major economies avoiding a severe downturn, bringing down inflation without increasing unemployment. Despite this cautious optimism, higher-for-longer interest rates, debt sustainability challenges, continuing geopolitical tensions, and ever-worsening climate risks continue to pose challenges to growth, threatening decades of development gains, especially for least developed countries and small island developing states.
China’s growth is expected to register a slight uptick, now projected at 4.8 percent in 2024, compared to 4.7 percent in January. However, this is a moderation from the 5.2 percent growth recorded in 2023, with the property sector posing a significant downside risk. Enhanced policy support is expected to boost investments in public infrastructure and strategic sectors in China.
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