UN upgrades India's 2024 GDP growth projection to 6.9% from 6.2%; WATCH global economic prospects
By Team Asianet Newsable | First Published May 17, 2024, 11:29 AM ISTThe United Nations has upwardly revised India's growth projections for 2024, now forecasting the country's economy to expand by nearly 7% this year. This growth is primarily attributed to robust public investment and resilient private consumption.
The United Nations has upwardly revised India's growth projections for 2024, now forecasting the country's economy to expand by nearly 7% this year. This growth is primarily attributed to robust public investment and resilient private consumption.
The World Economic Situation and Prospects as of mid-2024, released Thursday, said, “India’s economy is forecast to expand by 6.9% in 2024 and 6.6% in 2025, mainly driven by strong public investment and resilient private consumption. Although subdued external demand will continue to weigh on merchandise export growth, pharmaceuticals and chemicals exports are expected to expand strongly.”
The world economy forecast to grow by 2.7% in 2024 & 2.8% in 2025, reflecting improved prospects in the USA & several large economies.
The outlook is only cautiously optimistic as economic vulnerabilities remain.
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The mid-year update from the United Nations marks a significant upward revision in India's economic growth projections, with the GDP forecast now standing at 6.9%, compared to the earlier prediction of 6.2% made in January. In the UN's World Economic Situation and Prospects (WESP) 2024 report unveiled at the beginning of the year, India's growth was initially anticipated to reach 6.2% in 2024, driven by robust domestic demand and vigorous expansion in both manufacturing and services sectors. However, the latest assessment maintains the GDP growth projection for India in 2025 at 6.6%, indicating stability in the economic outlook for the following year.
The update indicates that consumer price inflation in India is expected to slow down from 5.6% in 2023 to 4.5% in 2024, remaining within the central bank’s target range of two to six per cent. Likewise, inflation rates across other South Asian nations decreased in 2023 and are projected to further decelerate in 2024, ranging from 2.2% in the Maldives to 33.6% in Iran. Despite this moderation, food prices stayed elevated in the initial quarter of 2024, particularly in Bangladesh and India.
Furthermore, the update notes improvements in labour market indicators in India, attributed to robust economic growth and increased labour force participation. The Indian government's commitment to gradually reducing the fiscal deficit while prioritizing capital investment remains steadfast.
The economic outlook for South Asia is anticipated to stay robust, supported by India's strong performance and a slight recovery in Pakistan and Sri Lanka. Regional GDP is forecasted to grow by 5.8% in 2024 (an upward revision of 0.6 percentage points since January) and 5.7% in 2025, slightly lower than the 6.2% recorded in 2023. However, persistent tight financial conditions, along with fiscal and external imbalances, are expected to continue weighing on South Asia’s growth performance. Additionally, potential increases in energy prices due to geopolitical tensions and ongoing disruptions in the Red Sea pose risks to the regional economic outlook.
The latest projections indicate that the world economy is expected to grow by 2.7% in 2024, marking an increase of 0.3 percentage points from the January forecast, and by 2.8% in 2025, showing a slight uptick of 0.1 percentage points.
These upward revisions primarily stem from a more optimistic outlook in the United States, with the latest forecast pointing to 2.3% growth in 2024, reflecting an upward revision of 0.9 percentage points since January. Additionally, several major emerging economies, including Brazil, India, and Russia, contribute to the improved forecasts.
The update highlights that several large developing economies, such as Indonesia, India, and Mexico, are experiencing the benefits of robust domestic and external demand. In contrast, many economies in Africa, Latin America, and the Caribbean are following a low-growth trajectory, grappling with challenges like high inflation, elevated borrowing costs, persistent exchange rate pressures, and ongoing political instability.
Furthermore, the potential escalation and spread of conflicts in Gaza and the Red Sea region introduce further uncertainties to the near-term outlook for the Middle East, as mentioned in the mid-year update.
Global trade is anticipated to rebound in 2024, with the initial surge in trade flows attributed to the destocking of inventory accumulated during the supply chain disruptions in 2021-22. China's foreign trade exhibited faster growth than expected in the first two months of 2024, primarily driven by exports to emerging markets, particularly Brazil, India, and Russia.
However, ongoing geopolitical tensions in the Middle East and disruptions in the Red Sea, coupled with escalating freight costs, continue to present challenges to global trade.
The mid-year update underscores an improvement in global economic prospects since January, with major economies managing to avoid severe downturns and achieving a balance between lowering inflation and preventing unemployment from rising. Nevertheless, the outlook remains cautiously optimistic. Challenges such as sustained high interest rates, concerns about debt sustainability, persistent geopolitical tensions, and escalating climate risks continue to pose threats to growth, jeopardizing decades of development gains, especially for least developed countries and small island developing states.
Regarding China, the outlook sees a slight improvement, with growth now projected to reach 4.8% in 2024, up from the 4.7% forecasted in January. China's growth is expected to moderate from 5.2% in 2023 to 4.8% in 2024. The release of pent-up consumer demand following the lifting of pandemic-related restrictions has largely subsided. While enhanced policy support is anticipated to bolster investments in public infrastructure and strategic sectors, the property sector presents a notable downside risk to the Chinese economy.
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