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World Bank hikes India’s economic growth projection to 7% for FY 2024-25

World Bank hikes India’s economic growth projection to 7% for FY 2024-25

  • The bank says India’s growth continues to be strong despite a challenging global environment

Highlights:

  • The World Bank has revised its growth forecast for the Indian economy to 7% for the current fiscal year, up from its earlier estimate of 6.6%.
  • This adjustment reflects India’s continued economic resilience in a challenging global environment, bolstered by strong public infrastructure investment and robust private sector participation.

India’s Growth Trajectory:

  • In its report titled India Development Update: India’s Trade Opportunities in a Changing Global Context, the World Bank emphasized that India remains the fastest-growing major economy globally.
  • The Indian economy grew at an impressive 8.2% in the fiscal year 2023-24, driven by a combination of public infrastructure investment and a significant upswing in household investments in real estate.
  • The manufacturing sector, with a growth rate of 9.9%, played a pivotal role in this expansion, supported by resilient services that compensated for the weaker performance in agriculture.
  • The World Bank’s updated projection aligns with the forecasts of other global financial institutions such as the International Monetary Fund (IMF) and the Asian Development Bank (ADB), both of which have also revised their growth estimates for India to 7% for the fiscal year ending March 2025.

Employment Trends and Economic Inclusivity:

  • Reflecting the broader economic trends, urban unemployment has shown signs of improvement since the pandemic, particularly among female workers. Female urban unemployment declined to 8.5% in the early months of FY 2024-25.
  • However, challenges remain, particularly in addressing the high urban youth unemployment rate, which remains elevated at 17%.

Expanding India's Trade Potential:

  • The report underscores the critical role of trade in sustaining and accelerating India’s economic growth. As the global trade landscape becomes increasingly protectionist, India faces both challenges and opportunities in reconfiguring its trade strategies.
  • The post-pandemic shift in global value chains has opened new avenues for India, particularly in sectors where the country already excels, such as IT, business services, and pharmaceuticals.
  • However, the report suggests that India could further diversify its export basket to include textiles, apparel, footwear, electronics, and green technology products.
  • Auguste Tano Kouame, the World Bank’s country director in India, stressed the importance of harnessing these trade opportunities to further boost growth. He noted that a recovery in agriculture, coupled with resilient service sectors, would help offset any potential moderation in industrial growth.

Strategic Recommendations:

  • To achieve the ambitious target of $1 trillion in merchandise exports, the World Bank’s report recommends a three-pronged strategy for India:
    • Reducing Trade Costs: Streamlining processes and cutting down on bureaucratic red tape to make trade more efficient.
    • Lowering Trade Barriers: Removing obstacles that hinder the free flow of goods and services across borders.
    • Deepening Trade Integration: Enhancing India's participation in global trade networks and fostering stronger economic ties with other countries.
  • By focusing on these areas, India can capitalize on its strengths and address the evolving dynamics of the global trade environment.

Prelims takeaways:

  • The India Development Update [IDU]
  • ADB, IMF, WB

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