UN Boosts India's 2024 Growth Forecast to 6.9%

The UN's World Economic Situation and Prospects (WESP) report, released on Thursday, forecasts India’s economy to grow by 6.9% in 2024. This revised projection marks an increase from the earlier estimate of 6.2% made in January. The report also anticipates a growth rate of 6.6% for 2025, which remains unchanged from previous forecasts.

Key Drivers of India's Economic Growth

The WESP report attributes India's robust economic growth to strong public investment and resilient private consumption. Despite subdued external demand affecting merchandise export growth, the export sectors for pharmaceuticals and chemicals are expected to expand strongly.

Inflation and Labour Market Outlook

In addition to growth projections, the UN report mentions a slowdown in consumer price inflation from 5.6% in 2023 to 4.5% in 2024. This anticipated decrease aligns with the Reserve Bank of India’s (RBI’s) target range of 2-6%. The labour market in India has also shown improvement, supported by economic growth and higher labour force participation.

Comparative Growth Projections

The UN's updated projection follows Moody’s ratings, which pegged India’s economic growth at 6.6% for the current fiscal year. This estimate is lower than the RBI's projection of 7% but matches Deloitte’s projection of 6.6%. Similarly, S&P Global Ratings and Morgan Stanley have projected a growth rate of 6.8%, while the Asian Development Bank (ADB) and Fitch Ratings both estimated a growth rate of 7%.

Regional Economic Developments

The report also highlighted economic developments in South Asia, noting that Pakistan and Sri Lanka have shown slight recovery. With India's strong performance, the economic outlook for the region remains positive. The regional GDP is now expected to grow by 5.8% in 2024, up from the previous projection of 5.2%, and 5.7% in 2025.

Global Economic Outlook

Globally, the economy is projected to grow by 2.7% in 2024, an increase of 0.3 percentage points from the January forecast. For 2025, global growth is expected to be 2.8%, an increase of 0.1 percentage points. The US economy is projected to grow by 2.3% in 2024, an upward revision of 0.9 percentage points. China’s growth rate was also revised to 4.8% in 2024, up from 4.7% in January.

Challenges and Opportunities

Several large developing countries, including Indonesia, India, and Mexico, are benefiting from strong domestic and external demand. However, many economies in Africa, Latin America, and the Caribbean are experiencing low growth due to high inflation, elevated borrowing costs, persistent exchange rate pressures, and lingering political instability. Global trade is expected to recover in 2024, but challenges remain due to persistent geopolitical tensions in the Middle East, disruptions in the Red Sea, and escalating freight costs.

In summary, the UN's WESP report paints a positive picture for India's economic growth, driven by strong public investment and resilient private consumption. Despite global challenges, India's economic outlook remains robust, with significant contributions from key export sectors and an improving labour market.