World Bank revises Indian economy growth projection to 7.5% for FY23/24

The World Bank in its South Asia Development Update April 2024 has revised its earlier projection of Indian economy growth by 1.2 per cent to 7.5 per cent for FY23/24. It said overall, growth in South Asia is expected to be strong at 6.0 per cent in 2024, driven mainly by robust growth in India and recoveries in Pakistan and Sri Lanka. According to the report, South Asia is expected to remain the fastest-growing region in the world for the next two years, with growth projected to be 6.1% in 2025. It said ‘In India, which accounts for the bulk of the region's economy, output growth is expected to reach 7.5% in FY23/24 before returning to 6.6% over the medium term, with activity in services and industry expected to remain robust’. 

In India, the World Bank said, economic activity surprised on the upside in 2023Q4, with growth of 8.4 per cent from a year ago. The expansion was supported by rapid increases in investment and government consumption. More recent survey data point to continued strong performance. It added in February, India's composite purchasing managers index (PMI) stood at 60.6, well above the global average of 52.1 (a value above 50 indicates expansion). Growth in FY2023/24 is estimated to have exceeded earlier forecasts. According to the report, in India, inflation has remained within the Reserve Bank of India's 2-6 per cent target range since a spike in mid-2023, and the policy rate has remained unchanged since February 2023. Food price inflation has been elevated, partly reflecting a weak harvest due to El Nino.

In India, output growth is projected to reach 7.5 percent in FY2023/24 on the back of robust growth in Q3 of FY2023/24. Growth is expected to moderate to 6.6 percent in FY2024/25 before picking up in subsequent years as a decade of robust public investment yields growth dividends. The expected slowdown in growth between FY2023/24 and FY2024/25 mainly reflects a deceleration in investment from its elevated pace in the previous year. It further said growth in services and industry is expected to remain robust, the latter aided by strong construction and real estate activity. Inflationary pressures are expected to subside, creating more policy space for easing financial conditions.

As per the report, in Bangladesh, output is expected to rise by 5.7% in FY24/25, with high inflation and restrictions on trade and foreign exchange constraining economic activity. Following the contraction in FY22/23, Pakistan's economy is expected to grow by 2.3% in FY24/25 as business confidence improves. In Sri Lanka, output growth is expected to strengthen to 2.5% in 2025, with modest recoveries in reserves, remittances, and tourism.