India’s Economic Growth Continues to Shine, Predicted to Reach 6.7% in 2024, says UN Report

India’s economy is projected to achieve a 6.7% growth rate in the calendar year 2024, buoyed by strong domestic demand despite challenges such as increased interest rates and reduced external demand affecting investments and exports in the current year, according to a UN report.

According to the recently published mid-2023 edition of the World Economic Situation and Prospects report, India’s economy, which holds the position of being the largest in South Asia, is anticipated to grow by 5.8% in 2023 and further by 6.7% in 2024 (based on the calendar year), primarily driven by its robust domestic demand.

The UN report highlights that despite India’s projected economic growth in 2023 and 2024, challenges such as higher interest rates and reduced external demand are likely to hinder investments and exports. On a positive note, inflation in India is expected to decrease to 5.5% in 2023, primarily due to moderating global commodity prices and a slower currency depreciation, resulting in reduced imported inflation.

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The mid-year assessment for India’s economic growth maintains the same estimates as those presented in the World Economic Situation and Prospects 2023 report unveiled in January of this year, indicating no changes in the projections.

According to the flagship report released in January, India’s GDP is predicted to moderate to 5.8% in 2023 due to factors like higher interest rates and a global economic slowdown impacting investments and exports. However, the report also emphasized that India’s economic growth is expected to remain strong compared to other South Asian nations. It projected India to achieve a growth rate of 6.7% in 2024, positioning it as the fastest-growing major economy globally. The Chief of the Global Economic Monitoring Branch at the UN Department of Economic and Social Affairs, Hamid Rashid, referred to India as a “bright spot” in the world economy during a press conference.

During a recent interaction, Hamid Rashid, Chief of the Global Economic Monitoring Branch at the UN, reiterated that India continues to be a bright spot in the global economy. He mentioned that their projection for India’s economic trajectory has remained unchanged since January and expressed confidence in their forecast for the year. Rashid highlighted positive factors, such as a significant reduction in inflation in India compared to the regional average for South Asia, which provides room for fiscal expansion and monetary accommodation. He emphasized that these factors would support domestic demand in the country.

While discussing the Indian economy, Hamid Rashid acknowledged the existence of risks on the external front. He cautioned that if the external financing conditions worsen and become more restrictive, India may encounter challenges, potentially affecting exports. The mid-year assessment report also highlighted the dim prospects for a strong global economic recovery due to persistent inflation, increasing interest rates, and elevated uncertainties.

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The world economy faces the risk of prolonged low growth due to the persistent impact of the COVID-19 pandemic, worsening climate change effects, and unresolved macroeconomic structural challenges, according to the report. The latest projections indicate a global growth rate of 2.3% in 2023 (up 0.4 percentage points from the previous forecast) and 2.5% in 2024 (down 0.2 percentage points), reflecting a modest improvement in the global growth outlook for 2023.

The report highlights resilient household spending in the US, leading to an upward revision of the growth forecast to 1.1% in 2023. The European Union’s economy is expected to benefit from lower gas prices and strong consumer spending, with a projected growth rate of 0.9%, as stated in the report.

China’s growth forecast for this year has been revised upward from 4.8% to 5.3% due to the easing of COVID-19-related restrictions. However, the current global economic outlook poses a significant challenge to achieving the Sustainable Development Goals (SDGs), according to UN Under-Secretary-General for Economic and Social Affairs, Li Junhua. Urgent action is needed to address the funding shortages faced by many developing countries, enhance their capabilities to invest in sustainable development, and facilitate the transformation of their economies towards inclusive and sustainable long-term growth.

Global trade is facing challenges due to factors such as geopolitical tensions, weakened global demand, and tighter monetary and fiscal policies. The forecast for the volume of global trade in goods and services predicts a growth rate of 2.3% in 2023, which is lower than the pre-pandemic trend.

The mid-year report highlights that central banks in South Asia have been raising interest rates in early 2023 to address inflation and stabilize exchange rates. However, the Reserve Bank of India opted to keep the policy rate unchanged at 6.5% in April 2023, following a cumulative increase of 250 basis points since May 2022.