The World Bank has revised its growth forecast for India's economy to 7% for the current fiscal year, driven by a recovery in agriculture and rising rural demand. This updated figure surpasses the bank's previous June projection of 6.6%.
The report, published on Tuesday, emphasises that India's growth continues to be strong despite global challenges.
World Bank Senior Economist, Ran Li attributed the revision of India's GDP forecast to an improved monsoon and increasing private consumption, CNBC reports.
According to the India Development Update, the World Bank expects India's growth rate to remain robust at 7% for 2024-25.
“Amid geopolitical uncertainties and relatively restrictive monetary policy, the global economic activity experienced a deceleration in 2023 to 2.6%. India showed extraordinary resilience against challenging external conditions and grew at 8.2% in FY24, as the fastest growing major economy in the world,” the World Bank stated in its latest India Development Update (September 2024).
Although a modest slowdown in the industrial sector is anticipated, the recovery in agriculture is expected to offset this, with the services sector continuing to perform strongly.
Furthermore, rural private consumption is expected to rebound due to the anticipated recovery in agriculture.
The World Bank projects India's medium-term economic growth rate to remain strong, averaging 6.7% over the next two fiscal years. The bank also anticipates that private investment will gradually increase, supporting the recovery in consumption.
One of the main challenges facing India's economy is job creation, with the urban unemployment rate remaining high at an average of 17%, according to the World Bank.
The World Bank has also urged India to develop a strategic plan to diversify its exports, noting that the country is not fully capitalising on the China Plus One strategy.
Moreover, last week, Moody's upgraded its economic growth forecast for India to 7.2% in 2024 and 6.6% in 2025, up from its previous estimates of 6.8% and 6.4%, respectively, citing broad-based growth as the driving factor.
Similarly, in July, the International Monetary Fund increased its GDP growth forecast for India in FY25 by 20 basis points, raising it to 7%.
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