New Delhi, Sep 3 (FN Bureau) Despite challenging external conditions, the World Bank on Tuesday raised India’s gross domestic product (GDP) growth forecast to 7% for fiscal 2024-25 (FY25) from 6.6% projected earlier. In its India Development Update released here today, the World Bank said that India’s medium-term outlook remains positive and GDP growth would be averaging at 6.7% over fiscal years in FY26 and FY27. The multilateral bank said that with robust revenue growth and further fiscal consolidation, the debt-to-GDP ratio is projected to decline from 83.9% in FY24 to 82% by FY27. Further, it said that the current account deficit is expected to remain at around 1-1.6% of GDP up to FY26/27.
“India’s robust growth prospects along with declining inflation will help to reduce extreme poverty,” said Auguste Tano Kouame, World Bank’s Country Director in India. Kouame further said that India can boost its growth further by harnessing its global trade potential. “In addition to IT, business services and pharma where it excels, India can diversify its export basket with increased exports in textiles, apparel, and footwear sectors, as well as electronics and green technology products,” he said. The World Bank report has recommended a three-pronged approach towards achieving the $1 trillion merchandise export target by reducing trade costs further, lowering trade barriers, and deepening trade integration. “With rising costs of production and declining productivity, India’s share in global apparel exports has declined from 4% in 2018 to 3% in 2022,” said Nora Dihel and Ran Li, Senior Economists, co-authors of the report.
“To create more trade-related jobs, India can Integrate more deeply into global value chains which will also create opportunities for innovation and productivity growth,” they said. The India Development Update observed that India remained the fastest-growing major economy and grew at a rapid clip of 8.2% in FY24. The Update noted that growth was boosted by public infrastructure investment and an upswing in household investments in real estate. “On the supply side, it was supported by a buoyant manufacturing sector, which grew by 9.9 percent, and resilient services activity, which compensated for underperformance in agriculture. Reflecting these trends, urban unemployment has improved gradually since the pandemic, especially for female workers,” it said. The report further added, “Female urban unemployment fell to 8.5 percent in early FY24/25, although urban youth unemployment remained elevated at 17 percent. With a narrowing of the current account deficit and strong foreign portfolio investment inflows, foreign exchange reserves reached an all-time high of $670.1 billion in early August, equivalent to over 11 months of cover (in FY23/24 import terms).”