Economic Growth
World Bank raises India FY25 GDP growth forecast by 40 bps to 7.0%
This story was originally published at 14:13 IST on 10 October 2024
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NEW DELHI - The World Bank Thursday raised its India GDP growth forecast for 2024-25 (Apr-Mar) by 40 basis points to 7.0% on the back of robust agricultural output and expectations of improving private consumption. The multilateral agency retained its growth forecast for FY26 at 6.7%. The Indian economy had expanded 8.2% in FY24.
"Larger-than-expected agricultural output, along with policies designed to raise employment growth, are expected to contribute to strong private consumption growth, while growth in public consumption is projected to moderate in line with budgeted fiscal consolidation," the World Bank said in its October edition of the South Asia Development Update.
Even with the sharp upward revision, the multilateral agency's growth forecast for India remains 20 bps below the Reserve Bank of India's projection of 7.2% for FY25. For FY26, too, the World Bank's forecast is lower than the RBI's, which sees GDP growing 7.1% next year.
According to the multilateral development bank, robust growth likely continued in Jul-Sept after the GDP expanded 6.7% in the quarter ended June. Even as the Apr-Jun growth print was at a five-quarter low, it reflected a strong recovery in private consumption and resilient services exports, the World Bank said.
The RBI on Wednesday lowered the Jul-Sept growth forecast by 20 bps to 7.0% as some high frequency indicators highlighted moderating growth momentum. It, however, raised the growth forecast for Oct-Dec and Jan-Mar by 10 and 20 bps, respectively.
The World Bank expects investment growth to moderate in India this year because of a high base effect. It also sees the government continuing with its fiscal consolidation over the medium term, driven by "robust revenue growth and a modest increase in current spending". The government expects to lower its fiscal deficit to 4.9% of GDP in FY25 from 5.6% last year.
Even though the government focusses on fiscal consolidation, debt levels are expected to remain elevated and the debt service costs will continue to constrain fiscal policy in India, as with the rest of South Asia, the World Bank report said.
India can increase its long-term growth potential, as other South Asian countries, from the ongoing shifts in global value chains, the World Bank said. "Global investors are seeking locations with low geopolitical risks and strong economic fundamentals, and the region, especially India, is well-placed to benefit. However, for this to happen, trade and investment policies need to change," the multilateral agency said. End
Reported by Shubham Rana
Edited by Vandana Hingorani
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