India Remains A Bright Spot, Economy Expected To Grow 6.7% In 2024: UN

India’s economy is expected to grow by 6.7% in the calendar year 2024, supported by resilient domestic demand, according to a UN report.

The report added that higher interest rates and weaker external demand will continue to weigh on investment and exports this year for the country.

The World Economic Situation and Prospects as of mid-2023, released on Tuesday, said India’s economy, the largest in the South Asian region, is expected to expand by 5.8% in 2023 and 6.7% in 2024 (on a calendar year basis), supported by resilient domestic demand.

However, higher interest rates and weaker external demand will continue to weigh on investment and exports in 2023, it said.

Inflation in India is expected to decelerate to 5.5% in 2023 as global commodity prices moderate and slower currency depreciation reduce imported inflation.

The estimates for India’s economic growth in the mid-year assessment remained unchanged from the projections made in the World Economic Situation and Prospects 2023 report launched in January this year.

The flagship report issued in January said that India’s GDP is projected to moderate to 5.8% in 2023 as higher interest rates and a global economic slowdown weigh on investment and exports.

India’s economic growth is expected to remain "strong" even as prospects for other South Asian nations "are more challenging." India is projected to grow at 6.7% in 2024, making it the fastest-growing major economy in the world, the flagship report said.

Chief of the Global Economic Monitoring Branch, Economic Analysis and Policy Division, UN Department of Economic and Social Affairs, Hamid Rashid, said at a press conference that India is a "bright spot" in the world economy.

In response to a question by PTI on the trajectory of the Indian economy, Rashid said on Tuesday, "India remains a bright spot. Our projection for India hasn't changed since January, and we see many positives, including the fact that inflation has come down significantly."

"We are pretty confident with our forecast right now for the year," he added.

India’s inflation is about 5.5%, while the regional average for South Asia is 11%. Rashid said this means there will be significant room for both fiscal expansion and monetary accommodation, which would support domestic demand.

He, however, added that risks lie on the external side. He noted that if the external financing condition deteriorates further and becomes much tighter, then India would face some challenges, and exports may face some challenges going forward.

The mid-year assessment said that prospects for a robust global economic recovery remain dim amid stubborn inflation, rising interest rates, and heightened uncertainties.

Instead, the world economy faces the risk of a prolonged period of low growth as the lingering effects of the Covid-19 pandemic, the ever-worsening impact of climate change, and macroeconomic structural challenges remain unaddressed.

According to the report, the world economy is now projected to grow by 2.3% in 2023 (+0.4 percentage points from the January forecast) and 2.5% in 2024 (-0.2 percentage points), a slight uptick in the global growth forecast for 2023.

In the US, resilient household spending has prompted an upward revision of the growth forecast to 1.1% in 2023. The European Union’s economy—driven by lower gas prices and robust consumer spending—is now projected to grow by 0.9%, the report said.

China’s growth this year is now forecast at 5.3%, as compared to the 4.8% projected earlier this year, as a result of Covid-19-related restrictions being lifted.

"The current global economic outlook presents an immediate challenge to delivering on the SDGs," said UN Under-Secretary-General for Economic and Social Affairs, Li Junhua.

"The global community must urgently address the growing shortages of funding faced by many developing countries, strengthening their capacities to make critical investments in sustainable development and helping them transform their economies to achieve inclusive and sustained long-term growth."

Global trade remains under pressure due to geopolitical tensions, weakening global demand, and tighter monetary and fiscal policies. The volume of global trade in goods and services is forecast to grow by 2.3% in 2023, well below the pre-pandemic trend.

The mid-year report noted that central banks in South Asia continued their interest rate hikes in early 2023 to tackle inflation and stabilise exchange rates. However, the Reserve Bank of India kept the policy rate unchanged at 6.5% in April 2023, after a cumulative increase of 250 basis points since May 2022.