A strong domestic economy will push India’s growth to 6.9% in 2024 from 6.2% projected earlier, the United Nations said in its latest World Economic Situation and Prospects report’s mid-year update.
“India’s economy is forecast to expand by 6.9 per cent in 2024 and 6.6 per cent in 2025,29 mainly driven by strong public investment and resilient private consumption,” the UN Department of Economic and Social Affairs said.
It noted that even as the government brings down its fiscal deficit, it will continue to increase capital investment.
The government has set a target to reduce the fiscal deficit to 5.1% in FY25 from 5.8% in the previous year.
The international agency noted that external conditions will likely weigh on merchandise export growth, and pharmaceuticals and chemicals are expected to expand strongly in the year.
Although the UN pointed out that global trade is expected to recover in 2024, it highlighted “persistent geopolitical tensions in the Middle East and disruptions in the Red Sea, and escalating cost of freight continue to pose challenges to global trade.”
India’s merchandise exports declined 3% in FY24 compared with the previous year.
The revision follows similar revisions by other agencies on the back of strong performance in the previous year.
IMF projects India to grow 6.8% in FY25, whereas ADB raised India’s FY25 growth forecast to 7%.
For 2025, the UN kept the forecast unchanged at 6.6%.
On the inflation front, the agency was also optimistic, as it predicted inflation to fall closer to the Reserve Bank of India’s target of 4.5%.
“Consumer price inflation in India is projected to decelerate from 5.6 per cent in 2023 to 4.5 per cent in 2024, staying within the central bank’s 2 to 6 per cent medium-term target range,” it said.
However, it noted that food inflation has remained high in the first quarter of 2024.
Data released earlier this week showed a slight uptick in food inflation in April to 8.7% from 8.5% in the previous month.
“In India, labour market indicators have also improved amid robust growth and higher labour force participation,” it said.
The UN also noted that surging demand for critical minerals presented new opportunities for developing economies but pointed to a need for innovation and policy and institutional reforms.
“While Brazil, Chile, India, Indonesia, and South Africa hold a significant share of critical mineral deposits, they contribute comparatively little to mining innovation,” it said.
The international body also raised the global growth forecast for 2024 upward to 2.7% from 2.4% projected in January and revised 2025 numbers by 0.1 percentage point to 2.8%.
“The upward revisions mainly reflect improved prospects in the United States of America and several large developing economies, notably India and Brazil,” it said.
The US growth rate for 2024 was revised upward by 0.9 percentage points to 2.3%, whereas China’s was revised by 0.1 percentage points to 4.8%.
“The outlook is only cautiously optimistic. 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,” it said.
