The World Bank has upgraded its forecast for India’s GDP growth to 7 percent for the fiscal year 2024-25, a significant improvement from the previously estimated 6.6 percent.

This optimistic revision comes in the wake of a robust 8.2 percent growth in the preceding year, which has bolstered confidence in India’s economic resilience despite a challenging global environment and the waning effects of the post-pandemic rebound. 

The latest India Development Update from the World Bank emphasizes that while the outlook remains positive, there are considerable external risks that could impact growth.

The report highlights ongoing geopolitical tensions, which could disrupt global commodity prices and critical supply chains, adding pressure to India’s economic landscape. Additionally, the threat of resurgent inflation poses challenges, potentially leading to higher global interest rates for an extended period. 

India’s positive growth outlook is largely supported by the sustained expansion of the services sector, particularly the growth of Global Capability Centers (GCCs), which have become a significant driver of economic activity. The report also notes the expected strengthening of the manufacturing sector, bolstered by several government initiatives.

 

These include the PM Gati Shakti master plan, aimed at enhancing logistics infrastructure, and the Trade Infrastructure for Export Scheme. (TIES), which seeks to improve the trade ecosystem.

 

Furthermore, increased tax rates are expected to create a more conducive business environment, further supporting economic growth. On the inflation front, the World Bank projects a favorable trend, with headline inflation expected to decline from an average of 5.4 percent in FY 23-24 to 4.5 percent in FY 24-25. This anticipated decrease is likely to provide some relief to consumers and help stabilize the broader economy. 

Despite the promising outlook, the World Bank cautions that India must remain vigilant to potential global economic disruptions. The combination of geopolitical instability, commodity price volatility, and potential inflationary pressures could pose significant challenge’s to sustaining high growth rates. The report underscores the importance policy reforms and strategic investments in key sectors to mitigate these risks and maintain momentum.

The World Bank’s upgrade of India’s GDP growth forecast to 7 percent for 2024-25 reflects confidence in the country’s economic fundamentals, underpinned by strong services and manufacturing sectors. However, the need for ongoing reforms and careful management of external risks remains critical to ensuring long-term, sustainable growth in the face of global uncertainties.