India’s 2024 economic growth forecast has been raised by the UN to around 7%

The United Nations has revised its growth projections for India to 2024, with the country’s economy projected to expand by 7% this year, driven mainly by strong public investment and resilient private consumption.

„India’s economy is projected to expand by 6.9% in 2024 and 6.6% in 2025, driven mainly by strong public investment and resilient private consumption,” the World Economic Status and Prospects, released on Thursday, said. Although weaker external demand will continue to weigh on commodity export growth, pharmaceuticals and chemical exports are expected to expand strongly.

India’s economic growth forecast of 6.9% in the mid-year update is an upward revision from the 6.2% GDP forecast by the UN in January this year. The UN’s World Economic Situation and Prospects (WESP) 2024 report, launched in January, said India’s growth in 2024 will be 6.2% amid strong domestic demand and strong growth in the manufacturing and services sectors. The January forecast for India’s GDP growth to 2025 remained unchanged at 6.6% in the latest assessment of economic conditions.

Consumer price inflation in India is projected to ease from 5.6% in 2023 to 4.5% in 2024, which is within the central bank’s medium-term target range of two to six percent. Similarly, inflation rates in other South Asian countries declined in 2023 and are expected to decline further in 2024, from 2.2% in the Maldives to 33.6% in Iran. Despite some moderation, food prices rose in the first quarter of 2024, particularly in Bangladesh and India.

In India, labor market indicators have also improved amid strong growth and higher labor force participation, it said. The Government of India is committed to gradually reduce the fiscal deficit while seeking to increase capital investment.

The economic outlook in South Asia is expected to remain strong, supported by strong performance of India’s economy and a slight recovery in Pakistan and Sri Lanka. Regional GDP is expected to grow by 5.8% in 2024 (an upward revision of 0.6 percentage points from January) and 5.7% in 2025, down from the 6.2% recorded in 2023. However, still tight financial conditions and continued fiscal and external imbalances weigh on South Asia’s growth performance. Additionally, a potential increase in energy prices amid geopolitical tensions and ongoing disruptions in the Red Sea pose a risk to the regional economic outlook.

The global economy is forecast to grow by 2.7% in 2024 (an increase of 0.3 percentage points from the January forecast) and 2.8% in 2025 (an increase of 0.1 percentage points).

The upward revisions mainly reflect a better outlook in the United States, where the latest forecast indicates growth of 2.3% in 2024 (an upward revision of 0.9 percentage points from January), and several large emerging economies, notably Brazil, India and Russia.

It noted that several large developing economies – Indonesia, India and Mexico – are benefiting from strong domestic and external demand. In comparison, many economies in Africa and Latin America and the Caribbean are on a low-growth trajectory, facing high inflation, high borrowing costs, persistent exchange rate pressures, and prolonged political instability. The intensification and spread of conflicts in Gaza and the Red Sea add further uncertainty to the near-term outlook for the Middle East, the mid-year update said.

Global trade is expected to rebound in 2024. Stockpiling of inventory amid supply chain disruptions in 2021-22 may account for the initial boost in trade flows in the first months of the year. „China’s foreign trade grew faster than expected in the first two months of 2024, driven largely by exports to emerging markets, particularly Brazil, India and Russia,” it said.

However, persistent geopolitical tensions in the Middle East and disruptions in the Red Sea and rising freight costs continue to pose challenges to global trade.

The mid-year update said the global economic outlook has improved since January, with major economies avoiding a sharp downturn and reducing inflation without increasing unemployment. However, the outlook is only cautiously optimistic. High-long interest rates, debt sustainability challenges, ongoing geopolitical tensions and ever-worsening climate risks pose challenges to development, threatening decades of growth gains, particularly for least developed countries and small island developing states.

The outlook for China has registered a slight improvement, now expected to be 4.8 percent in 2024, up from 4.7 percent forecast in January. China’s growth is forecast to increase from 5.2% in 2023 to 4.8% in 2024. Consumer demand — released after the lifting of pandemic-related restrictions — has largely dissipated. Although improved policy support is expected to boost investments in public infrastructure and strategic sectors, the property sector poses a significant downside risk to the Chinese economy.