India's Economic Outlook Remains Bright: UN Projects 6.7 Per Cent Growth In 2024

According to a UN report titled "World Economic Situation and Prospects as of mid-2023," India's economy is projected to grow by 6.7 per cent in the calendar year 2024.

The report highlights that this growth will be supported by resilient domestic demand. However, it also states that higher interest rates and weaker external demand will continue to pose challenges for investment and exports in the country in 2023.

In 2023, the report predicts that India's economy, which is the largest in the South Asian region, will expand by 5.8 per cent. This growth will be driven by the strength of domestic demand.

Nevertheless, the report emphasises that higher interest rates and weaker external demand will continue to exert pressure on investment and exports throughout the year.

The report also provides insights into inflation in India. It anticipates that inflation will decelerate to 5.5 per cent in 2023. This moderation is attributed to the global decline in commodity prices and a decrease in imported inflation due to a slower currency depreciation.

It's worth noting that the estimates for India's economic growth in the mid-year assessment have remained unchanged from the projections made in the earlier World Economic Situation and Prospects 2023 report, which was released in January of the same year.

In January, the flagship report projected that India's GDP would moderate to 5.8 percent in 2023 due to the impact of higher interest rates and a global economic slowdown on investment and exports.

The report highlighted that India's economic growth is expected to remain strong compared to other South Asian nations, which face more challenging prospects. It stated that India is projected to grow at a rate of 6.7 percent in 2024, positioning it as the fastest-growing major economy in the world.

Hamid Rashid, the Chief of the Global Economic Monitoring Branch in the Economic Analysis and Policy Division of the UN Department of Economic and Social Affairs, told the PTI on Tuesday:

"India remains a bright spot. Our projection for India hasn't changed since January and we see many positives, including the inflation has come down significantly."

It warned of the risk of a prolonged period of low growth as the world continues to grapple with the effects of the COVID-19 pandemic, worsening climate change impacts, and unresolved macroeconomic structural challenges.

The report projects a global economic growth rate of 2.3 per cent in 2023, which is an upward revision of 0.4 percentage points from the January forecast. However, it slightly lowers the growth forecast for 2024 to 2.5 per cent, a decrease of 0.2 percentage points.

It also highlights the interest rate hikes implemented by central banks in South Asia to tackle inflation and stabilize exchange rates.

However, it mentions that the Reserve Bank of India kept its policy rate unchanged at 6.5 percent in April 2023, following a cumulative increase of 250 basis points since May 2022.

The United States experiences an upward revision in its growth forecast to 1.1 per cent in 2023, driven by resilient household spending. The European Union's economy is projected to grow by 0.9 per cent, supported by lower gas prices and robust consumer spending.

China's growth forecast for this year is raised to 5.3 per cent from the earlier projection of 4.8 per cent as COVID-19 restrictions are 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, reports Moneycontrol.

"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," Junhua added.

Global trade continues to face pressure due to geopolitical tensions, weakening global demand, and tighter monetary and fiscal policies. The volume of global trade in goods and services is forecasted to grow by 2.3 percent in 2023, which is below the pre-pandemic trend.