India's economic outlook brightens: UN projects 6.9 per cent growth in 2024

The United Nations has upgraded its projection for India's economic growth in 2024.

According to the mid-2024 update of the World Economic Situation and Prospects (WESP) report, India's GDP is now expected to grow by 6.9 per cent, up from the 6.2 per cent forecast made earlier this year.

Strong public investment and private consumption

The report attributes this positive outlook to strong public investment and consistent private consumption.

Although there have been challenges from subdued external demand affecting merchandise exports, sectors like pharmaceuticals and chemicals are anticipated to perform well.

The UN also projects a steady growth rate of 6.6 per cent for India in 2025.

Inflation and labour market

India's consumer price inflation is forecasted to decline to 4.5 per cent in 2024, a major drop from 5.6 per cent in 2023.

This decline keeps inflation within the Reserve Bank of India's target range of 2-6 per cent.

Other South Asian countries are also expected to see reduced inflation rates, with projections ranging from 2.2 per cent in the Maldives to a high of 33.6 per cent in Iran.

The report highlights that, despite a general moderation, food prices remained elevated in the first quarter of 2024, particularly in Bangladesh and India.

Labour market indicators in India have shown improvement, with increased labour force participation driven by strong economic growth.

The Indian government remains committed to reducing the fiscal deficit while boosting capital investments.

Regional economic outlook

South Asia is poised for strong economic performance, buoyed by India's strong growth and recoveries in Pakistan and Sri Lanka.

The regional GDP is expected to grow by 5.8 per cent in 2024 and 5.7 per cent in 2025, although these rates are lower than the 6.2 per cent recorded in 2023.

Tight financial conditions and fiscal imbalances continue to pose challenges to the region’s economic performance.

Global economic perspective

Globally, the UN report notes a positive outlook, while advising caution.

The world economy is projected to grow by 2.7 per cent in 2024 and 2.8 per cent in 2025, reflecting slight upward revisions from earlier forecasts.

Major economies have managed to curb inflation without increases in unemployment, avoiding severe downturns.

However, persistent high interest rates, debt sustainability issues, and geopolitical tensions remain significant risks.

Trade and geopolitical risks

The report highlights a potential recovery in global trade for 2024, driven initially by the destocking of inventory accumulated during the supply chain disruptions of 2021-22.

China’s foreign trade, particularly with emerging markets like Brazil, India, and Russia, has exceeded expectations in early 2024.

Nonetheless, ongoing geopolitical tensions in the Middle East and disruptions in the Red Sea continue to present challenges to global trade flows.

The UN's revised projections reflect a more optimistic economic scenario for India, stimulated by strong domestic factors and strategic investments.

(With inputs from PTI)