New Delhi: The World Bank Tuesday revised India’s FY25 growth forecast upward to 6.6% from 6.4% projected in January, on the back of strong public investment accompanied by private capex and rise in private consumption.
The multilateral institution noted that India is expected to retain the fastest growing economy tag. It raised FY26 growth forecast by 20 bps to 6.7%, noting that private consumption will benefit from a recovery in agricultural production and declining inflation. The FY27 growth is projected at 6.8%.
“Investment growth is still expected to be stronger than previously envisaged and remain robust over the forecast period, with strong public investment accompanied by private investment,” it said. The per capita growth is also expected to remain solid, it said.
The revision comes a week after India elected a new government.
The Indian economy grew faster-than-expected at 8.2% in FY24, government data released last month showed. “Growth in industrial activity, including manufacturing and construction, was stronger than expected, alongside resilient services activity, which helped offset a slowdown in agricultural production partly caused by monsoons,” the World Bank noted.
The FY25 estimate is lower than that of the International Monetary Fund, which expects the economy to expand 6.8% in the current fiscal, and the RBI projection of 7%. The RBI expects inflation to ease to 4.5% in FY25. “In India, inflation has kept within the Reserve Bank’s target range of 2 to 6% since September 2023,” the World Bank said.
Inflation eased to an 11-month low of 4.83% in April and is expected to decline further in May, according to experts. On the fiscal front, the bank projected an improvement.
“In India, the fiscal deficit is projected to shrink relative to GDP, partly because of increased revenues generated by the authorities’ efforts to broaden the tax base,” it said.
Stable global economy
The lender projected the global economy to stabilise in 2024, but at lower levels than historical standards. It noted that growth is expected to average 2.6% in 2024 compared with 2.4% in January, and nudge up to 2.7% over the next two years. “Four years after the upheavals caused by the pandemic, conflicts, inflation, and monetary tightening, it appears that global economic growth is steadying,” said Indermit Gill, the World Bank Group’s chief economist and senior vice president.
