Indian Economy to Surge by 7.5%, Leads South Asia’s Growth

Key Points:

• The Indian economy has significantly raised the initial forecast, projecting a growth of 7.5% in FY24 from 6.3%.
• South Asia’s collective growth forecast stands at 6.0%, with India playing a key role in regional economic resilience.
• The World Bank highlights the importance of boosting private investment and strengthening employment for sustained growth.

The World Bank’s latest projections reveal a significant upturn in the economic forecasts for India and cautious optimism for the broader South Asian region. With India’s economy projected to grow at an impressive rate of 7.5% in the fiscal year 2024, up from a previous estimate of 6.3%, the region’s economic landscape appears robust. This surge is not only a testament to the resilience of the Indian economy but also acts as a major driver for the region’s collective growth forecast at 6.0%, including countries like Pakistan and Sri Lanka.

Indian Economy Soars to 7.5% Growth in FY24

The remarkable rebound in India’s economy is anticipated to anchor South Asia’s growth. A mix of factors, including increased investment and government spending, underpins the revised forecast of 7.5% for FY24, significantly higher than the initial 6.3%. Furthermore, the last quarter of 2023 witnessed an 8.4% growth, supported by a strong Composite Purchasing Managers’ Index (PMI) of 60.6 in February and inflation remaining within the targeted 2-6% range. However, concerns such as higher food prices due to El Nino’s impact are noteworthy, hinting at potential headwinds.

Challenges Amidst 6.0% Growth in South Asia

Beyond India, the economic narrative in South Asia shows a mixed picture. Despite high inflation and trade restrictions, Bangladesh is poised to achieve a 5.7% growth in FY24/25. After recovering from a contraction, Pakistan looks towards a modest 2.3% growth, buoyed by improved business confidence. Experts expect Sri Lanka’s economy, on a path to recovery, to grow by 2.5% in 2025. These forecasts, however, come against the backdrop of concerns such as fragile fiscal positions and the threat of climate shocks, underscoring the need for resilient policies.

Boosting Investment: Key to South Asia’s Future Growth

Addressing the economic challenges, the World Bank emphasises the importance of boosting private investment and strengthening employment growth. Martin Raiser emphasises the potential for growth in South Asia despite challenges, stating that the region’s growth prospects remain bright in the short run. Conversely, Franziska Ohnsorge’s remark on the underutilised demographic dividend highlights a critical area for policy intervention.

Long-Term Outlook: Indian Economy Resilience

Looking ahead, India’s economic outlook remains positive, with an expected moderation in growth due to a deceleration in investment. Nonetheless, experts anticipate that sectors such as services and industry will remain robust. The long-term outlook appears promising. Projections indicate a declining fiscal deficit. The government is expected to decrease the debt. This positive trend is thanks to strong economic growth. Furthermore, consolidation efforts are contributing to this optimistic scenario.