World Bank Raises India’s Growth Forecast to 7% for FY25
The World Bank has revised India’s growth forecast from 6.6% to 7% for FY25, according to the latest India Development Update (IDU). This upward revision highlights India’s resilience in challenging global economic conditions.
Key Growth Drivers
India’s remarkable growth rate of 8.2% in FY23/24 was driven by significant public infrastructure investments and a surge in household investments in the real estate sector. The manufacturing sector expanded by 9.9%, and resilient services activity helped offset the underperformance of the agriculture sector.
Employment and Foreign Reserves
Urban unemployment rates have improved, especially among female workers, whose unemployment rate fell to 8.5% in early FY24/25. However, urban youth unemployment remains high at 17%. India’s foreign exchange reserves reached a record high of USD 670.1 billion in early August, equivalent to over 11 months of import cover.
Future Outlook
The World Bank’s outlook for India remains positive, with growth projected to stay strong at 7% in FY24/25 and continue robustly through FY26/27. The report anticipates a decline in India’s debt-to-GDP ratio from 83.9% in FY23/24 to 82% by FY26/27, alongside a stable current account deficit of around 1-1.6% of GDP.
Trade Opportunities
The IDU emphasizes the critical role of trade in sustaining and boosting India’s economic growth. Despite a protectionist global trade environment, the reconfiguration of global value chains post-COVID-19 presents significant opportunities for India. The report highlights India’s efforts to enhance competitiveness through the National Logistics Policy and various digital initiatives aimed at reducing trade costs.
Recommendations
To achieve its goal of USD 1 trillion in merchandise exports by 2030, the IDU recommends reducing trade costs, lowering trade barriers, and deepening trade integration. The report notes that India’s share in global apparel exports has declined from 4% in 2018 to 3% in 2022 due to rising production costs and declining productivity.
World Bank’s Country Director in India, Auguste Tano Kouame, stated, “India’s robust growth prospects along with declining inflation will help to reduce extreme poverty. India can boost its growth further by harnessing its global trade potential.”
Senior Economists Nora Dihel and Ran Li added, “To create more trade-related jobs, India can integrate more deeply into global value chains, creating opportunities for innovation and productivity growth.”
Doubts Revealed
World Bank -: The World Bank is an international organization that provides financial and technical help to developing countries to reduce poverty and support development.
Growth Forecast -: A growth forecast is a prediction about how much a country’s economy will grow in the future.
FY25 -: FY25 stands for Fiscal Year 2025, which is a one-year period used for accounting and budget purposes, ending in 2025.
Resilience -: Resilience means the ability to recover quickly from difficulties or challenges.
Global Economic Challenges -: These are problems that affect the economies of many countries around the world, like recessions or financial crises.
India Development Update -: This is a report by the World Bank that provides information and analysis about India’s economic situation and development.
Public Infrastructure -: Public infrastructure includes things like roads, bridges, and schools that are built and maintained by the government for public use.
Real Estate Investments -: These are investments in property like land and buildings.
Manufacturing Sector -: This sector includes businesses that produce goods in factories.
Services Sector -: This sector includes businesses that provide services like banking, education, and healthcare.
Urban Unemployment -: This refers to the number of people in cities who are looking for jobs but can’t find any.
Foreign Exchange Reserves -: These are assets held by a country’s central bank in foreign currencies, used to back its own currency and pay for international trade.
Trade Costs and Barriers -: Trade costs are expenses involved in trading goods and services, while barriers are obstacles like tariffs or regulations that make trade harder.
Export Goals -: These are targets set by a country to sell more goods and services to other countries.
