Economy: The UN upwardly revises India’s 2024 growth projection to 6.9%
Virendra Pandit
New Delhi: The United Nations has revised upwards India’s growth projections for 2024, with the country’s economy now forecast to expand by 6.9 percent this year, mainly driven by strong public investment and resilient private consumption.
The global body’s report “World Economic Situation and Prospects”, in mid-2024, released on Thursday, said, the Indian 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, according to the media reports on Friday.
The UN World Economic Situation and Prospects (WESP) 2024 report, launched in January, projected India’s growth at 6.2 percent in 2024, amid robust domestic demand and strong growth in the manufacturing and services sectors. The projection in January for India’s GDP growth for 2025 remains unchanged at 6.6 percent in the latest assessment of the economic situation.
The update said that consumer price inflation in India may decelerate from 5.6 percent in 2023 to 4.5 percent in 2024, staying within the Reserve Bank of India’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 also improved amid robust growth and higher labor force participation. The Indian government remains committed to gradually reducing the fiscal deficit while seeking to increase capital investment.
South Asia’s economic outlook is likely to remain strong, supported by a robust performance of India’s economy and a slight recovery in Pakistan and Sri Lanka. Regional GDP is projected to grow by 5.8 percent in 2024 (up by 0.6 percentage points since January) and 5.7 percent in 2025, 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. Besides, potential increases in energy prices amid geopolitical tensions and the ongoing disruption in the Red Sea pose a risk to the regional economic outlook, it said.
The world economy is now forecast to grow by 2.7 percent in 2024 (up by 0.3 percentage points from the January forecast) and 2.8 percent in 2025 (an increase of 0.1 percentage points).
The upward revisions mainly reflect a better outlook in the United States, where the latest forecast points to 2.3 percent growth in 2024 (an upward revision of 0.9 percentage points since January), and several large emerging economies, notably Brazil, India, and Russia.
Several large developing economies like Indonesia, India, and Mexico are benefiting from strong domestic and external demand. In comparison, many economies in Africa, Latin America, and the Caribbean are on a low-growth trajectory, facing high inflation, elevated borrowing costs, persistent exchange rate pressures, and lingering political instability. The possible intensification and spreading of conflicts in Gaza and the Red Sea add further uncertainties to the near-term outlook for the Middle East, the mid-year update said.
Global trade is expected to recover in 2024. The early boost to trade flows in the first months of 2024 can be attributed to the destocking of the inventory that 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, it said.
However, persistent geopolitical tensions in the Middle East, disruptions in the Red Sea, and escalating cost of freight continue to challenge global trade.
The mid-year update said global economic prospects have improved since January, with major economies avoiding a severe downturn, bringing down inflation without increasing unemployment.
However, the outlook is only cautiously optimistic. Higher-for-longer interest rates, debt sustainability challenges, continuing geopolitical tensions, and ever-worsening climate risks continue to challenge growth, threatening decades of development gains, especially for least-developed countries and small island developing states.
The outlook for China registered a small uptick with growth now expected to be 4.8 percent in 2024, up from 4.7 percent projected in January. China’s growth is projected to moderate to 4.8 percent in 2024, from 5.2 percent in 2023. Pent-up consumer demand released after the lifting of pandemic-related restrictions has largely dissipated. While enhanced policy support is expected to boost investments in public infrastructure and strategic sectors, the property sector poses a significant downside risk to the Chinese economy, it said.
