UN Revises India's 2024 Economic Growth Projection Upwards to Nearly 7%

The United Nations has significantly revised its projections for India's economic growth in 2024, now forecasting an expansion of 6.9%, up from the 6.2% forecast in January. This upward adjustment is driven by robust public investment and resilient private consumption, according to the mid-2024 update of the World Economic Situation and Prospects report.

Key Drivers of Growth

1. Public Investment and Private Consumption:

 Strong public investment and sustained private consumption are the primary catalysts for this upward revision. These factors are expected to offset the subdued external demand impacting merchandise exports.

  

2. Sectoral Performance: 

The pharmaceutical and chemical sectors are anticipated to lead export growth, despite overall challenges in global trade dynamics.

Economic Projections

2024: India's GDP is projected to grow by 6.9%.

2025: Growth is expected to moderate slightly to 6.6%.

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Inflation and Fiscal Outlook

Inflation: 

Consumer price inflation is projected to decrease from 5.6% in 2023 to 4.5% in 2024, staying within the Reserve Bank of India's target range.

Fiscal Policy: 

The Indian government remains committed to reducing the fiscal deficit while increasing capital investment.

Regional and Global Context

South Asia

The region's economic outlook is strengthened by India's performance, with regional GDP expected to grow by 5.8% in 2024.

Global Economy

The world economy is projected to grow by 2.7% in 2024, reflecting improvements in major economies like United States, Brazil, India, and Russia. This represents an increase of 0.3 percentage points from the January forecast.

Challenges and Risks

Despite the positive outlook, several risks could impact growth:

1. Geopolitical Tensions

 Ongoing geopolitical tensions in regions such as the Middle East and disruptions in the Red Sea pose significant risks to global trade and energy prices.

2. Tight Financial Conditions

Persistent high borrowing costs and fiscal imbalances in several economies could constrain growth.

3. Climate Risks

Increasing climate-related risks continue to threaten long-term economic stability, particularly for least developed countries and small island developing states.

Sectoral Insights

Global Trade

After initial boosts from inventory destocking, global trade is expected to face ongoing challenges due to freight costs and geopolitical disruptions.

China

China's economic growth is projected to moderate to 4.8% in 2024, influenced by the fading effects of pent-up consumer demand post-pandemic and risks in the property sector.

Conclusion

The UN's revised projections highlight a cautiously optimistic outlook for India and the global economy in 2024. India's robust public investment, resilient private consumption, and sectoral strengths in pharmaceuticals and chemicals position it well for near-term growth. However, the broader economic landscape remains fraught with risks that require careful navigation to sustain this positive trajectory.