The United Nations has revised its growth projections for India’s economy in 2024, now forecasting an expansion of close to seven percent. This upward revision, detailed in the World Economic Situation and Prospects (WESP) mid-2024 report released on Thursday, attributes the robust growth to strong public investment and resilient private consumption.
India’s economy is expected to grow by 6.9 percent in 2024 and 6.6 percent in 2025. This marks an increase from the 6.2 percent GDP growth projected by the UN in January 2024. Despite subdued external demand impacting merchandise exports, sectors like pharmaceuticals and chemicals are anticipated to see significant growth.
The report also projects a deceleration in India’s consumer price inflation from 5.6 percent in 2023 to 4.5 percent in 2024, aligning within the central bank’s target range of two to six percent. Similarly, inflation rates across other South Asian countries are expected to decline further in 2024, ranging from 2.2 percent in the Maldives to 33.6 percent in Iran. Nonetheless, food prices have remained elevated in the first quarter of 2024, particularly in Bangladesh and India.
Improvements in India’s labor market indicators have been noted, with increased labor force participation contributing to the robust economic growth. The Indian government remains committed to gradually reducing the fiscal deficit while increasing capital investment.
South Asia’s economic outlook remains strong, bolstered by India’s robust performance and slight recoveries in Pakistan and Sri Lanka. The regional GDP is projected to grow by 5.8 percent in 2024, an upward revision from January’s 5.2 percent forecast, and by 5.7 percent in 2025. However, tight financial conditions, fiscal and external imbalances, and potential energy price increases amid geopolitical tensions and disruptions in the Red Sea pose risks to the regional outlook.
Globally, the economy is now forecast to grow by 2.7 percent in 2024, up from the 2.4 percent forecast in January, and by 2.8 percent in 2025. This positive revision reflects improved outlooks in the United States, Brazil, India, and Russia. Specifically, the U.S. economy is expected to grow by 2.3 percent in 2024, a notable increase from the previous forecast of 1.4 percent. Strong domestic and external demand benefits large developing economies such as Indonesia, India, and Mexico.
In contrast, many African and Latin American economies continue on a low-growth trajectory, hindered by high inflation, elevated borrowing costs, persistent exchange rate pressures, and political instability. The ongoing conflicts in Gaza and the Red Sea add further uncertainties to the Middle East’s near-term outlook.
Global trade is anticipated to recover in 2024, with early boosts attributed to destocking inventories accumulated during the supply-chain disruptions of 2021-22. China’s foreign trade, particularly exports to Brazil, India, and Russia, grew faster than expected in early 2024. Nevertheless, persistent geopolitical tensions and escalating freight costs continue to challenge global trade.
The mid-year update presents a cautiously optimistic global economic outlook. While major economies have avoided severe downturns and brought down inflation without increasing unemployment, challenges remain. These include higher interest rates, debt sustainability issues, ongoing geopolitical tensions, and escalating climate risks, which threaten development gains, especially for least developed countries and small island developing states.
China’s growth forecast for 2024 has been slightly revised to 4.8 percent from 4.7 percent projected in January, down from 5.2 percent in 2023. The dissipation of pent-up consumer demand post-pandemic and risks in the property sector are significant concerns, though enhanced policy support is expected to boost public infrastructure investments.