India to grow at 6.5% in 2024: UNCTAD

The United Nations Conference on Trade and Development has raised India’s GDP growth forecast by 30 basis points to 6.5% in 2024. India grew 6.7% in 2023, as per UNCTAD.

“The expansion in 2023 was driven by strong public investment outlays as well as the vitality of the services sector which benefited from robust local demand for consumer services and firm external demand for the country’s business services exports. These factors are expected to continue to support growth in 2024,” the United Nations trade agency says.

An increasing trend of multinationals extending their manufacturing processes into India in an effort to diversify their supply chains will also have a positive impact on Indian exports, while moderating commodity prices will be beneficial to the country’s import bill, says UNCTAD.

“The Reserve Bank of India is expected to keep interest rates constant in the near term, while restrained public consumption spending will be offset by strong public investment expenditures,” it says.

India's GDP grew 8.4% year-on-year in the quarter ended December 31, 2023, much higher than the Reserve Bank of India (RBI) monetary policy committee's forecast of 6.5%.

While the global economic slowdown in 2023 was less severe than originally projected, UN Trade and Development in its latest report warns that further growth deceleration could be expected in 2024.

In other Southern Asian countries, however, economic growth remains more subdued. Three countries in the region – Bangladesh, Pakistan and Sri Lanka – are currently under IMF programmes, the conditionalities of which necessitate the application of tight monetary policies and fiscal austerity measures whose impacts are most severely felt by low-income households, says the UN body.

Looking to 2024, market expectations for lower interest rates raise hope for mitigating the pressure on private and public budgets worldwide, says UNCTAD. “However, monetary policy alone cannot provide solutions to key global challenges, the Trade and Development Report Update says, pointing to the ongoing crises linked to sovereign debt, ever-growing inequalities, and climate change. It underscores the need for coordinated global action, along with a balanced policy mix of fiscal, monetary, demand-side and investment boosting measures to achieve financial sustainability, create jobs, and improve income distribution,” it says.

Meanwhile, the International Monetary Fund on Tuesday raised India’s GDP growth forecast to 6.8% for the financial year 2024-25. This comes close on the heels of the Asian Development Bank raising India’s GDP growth forecast for the financial year 2024-25 to 7% from 6.7% earlier.

Earlier this month, the World Bank raised India’s GDP growth forecast by 20 basis points to 6.6% for the financial year 2024-25.

In March, Morgan Stanley raised India’s GDP growth forecast for the financial year 2024-25 by 30 basis points to 6.8% from 6.5%, aided by continued traction in industrial and capex activity.