India is projected to grow at the rate of 6.2 per cent in 2024, backed by a robust domestic demand and strong growth in the services and manufacturing sectors, the United Nations (UN) has said.
The UN released the World Economic Situation and Prospects (WESP) 2024 report on Thursday. The report states that South Asia’s gross domestic product (GDP) is expected to rise by 5.2 per cent in 2024, primarily due to India’s strong economic growth.
India continues to be the world’s fastest-growing large economy.
According to a report, India’s economy is expected to grow at a rate of 6.2 per cent in 2024, slightly lower than the estimated growth rate of 6.3 per cent for 2023. The report attributes this growth to robust domestic demand and a strong performance by the manufacturing and services sectors.
The report also projects that India’s GDP will increase to 6.6 per cent in 2025. The report highlights that India’s economic growth is expected to remain strong at 6.2 per cent this year, mainly due to resilient private consumption and strong public investment.
According to the Global Economic Division Monitoring Branch of the United Nations Department of Economic and Social Affairs (UN DESA), while the manufacturing and services sectors will continue to support the Indian economy, unpredictable rainfall patterns may reduce agricultural output.
The Chief of the Division, Hamid Rashid, stated that India has been outperforming its peers not only this year but also in the last few years. He added that India’s economic growth has remained consistently above six per cent, and this trend is expected to continue in 2024 and 2025.
Rashid has observed that despite the relatively high inflation rate in India, the government did not have to raise interest rates by a significant amount. As a result, inflation has decreased considerably. This has allowed the government to provide the fiscal support that was required without making any significant fiscal adjustments or retrenchments.
Additionally, domestic consumption is growing, household spending has increased and the employment situation has improved considerably. Therefore, Rashid is optimistic about India’s growth outlook in the near future.
During a discussion on the reasons holding back India’s economic growth, Shantanu Mukherjee, the Director of the Economic Analysis and Policy Division, referred to India’s GDP growth rates between 2022 and 2025.
He stated that the growth rates of 7.7 per cent, 6.3 per cent, 6.2 per cent and 6.6 per cent were not a hindrance to the country’s economy. He further added that if India grows at a much faster pace, it could lead to overheating of the economy due to the country’s size and complexity.
Mukherjee has pointed out that the Indian government has recently made changes to its tax collection systems, which have helped to provide a more stable playing field for businesses and other initiatives to progress. While discussing the risks facing the economy, he noted that some of those risks are global in nature.
India’s economy still largely depends on agriculture, which makes it vulnerable to climate change as the country is situated in the tropics. El Nino is a recurrent phenomenon that can be exacerbated by climate change. Therefore, if there is any significant disruption in agricultural production, it could have a major impact on the economy.
According to a report, consumer price inflation in India is expected to slow down from 5.7 per cent in 2023 to 4.5 per cent in 2024. The projected inflation rate will remain within the two to six per cent inflation target range set by the Central Bank.
However, the report also warned that there is a possibility of a surge in inflation in the upcoming months due to potential increases in commodity prices and the adverse impact of climate events on food prices. These factors could disrupt the pace of disinflation.
The labour market situation in South Asia remained fragile in 2023 despite improvements in some countries.
According to a report by the Reserve Bank of India, labour market indicators showed improvement in India over the year. In August, labour force participation reached its highest rate since the pandemic began. The unemployment rate in September averaged at 7.1 per cent, which is the lowest it has been in a year.
Despite weaker monsoon rains, unemployment in rural areas decreased and youth unemployment rates significantly declined during the first quarter of 2023, reaching their lowest value since the pandemic.
The Reserve Bank of India has been cautious in opening the country’s financial markets and has implemented appropriate risk management systems, the report stated. Meanwhile, the United Nations has projected a slowdown in global economic growth from an estimated 2.7 per cent in 2023 to 2.4 per cent in 2024, which is below the pre-pandemic growth rate of 3 per cent.
The report also noted that last year’s stronger-than-expected GDP growth masked short-term risks and structural vulnerabilities, despite exceeding expectations.
According to Mukherjee, the strong performance in 2023 is mainly due to the impressive growth of several large economies such as the United States, Brazil, India and Mexico. However, the UN’s primary economic report paints a gloomy picture of the global economy shortly. Persistently high-interest rates, escalating conflicts, sluggish international trade and increasing climate disasters are significant challenges to global growth.
The UN Secretary-General, Antonio Guterres, believes that 2024 is the year when the global economy must break free from this quagmire. He suggests that by making significant and bold investments, sustainable development and climate action can be promoted. This will help put the global economy on a stronger growth path for everyone.
