India's private consumption growth may taper off: World Bank

The World Bank has kept India's gross domestic product (GDP) growth forecast unchanged at 6.3% for the ongoing fiscal and 6.4% for the financial year 2024-25.

India is anticipated to maintain the fastest growth rate among the world's largest economies, but its post-pandemic recovery is expected to slow, with estimated growth of 6.3% in FY24, according to the World Bank. Growth is then expected to recover gradually, edging up to 6.4% in FY25 and 6.5% in FY26.

Private consumption growth is likely to taper off, as the post-pandemic pent-up demand diminishes and persistent high food price inflation is likely to constrain spending, particularly among low-income households, the World Bank says in its Global Economic Prospects report.

Growth in India is projected to remain strong, largely driven by robust investment and services, says the World Bank. Investment is envisaged to decelerate marginally but remain robust, supported by higher public investment and improved corporate balance sheets, including in the banking sector, it says.

Meanwhile, government consumption is expected to grow slowly, in line with the central government’s efforts to lower the share of current spending.

"Robust growth in India is mostly due to strong domestic demand: fixed investment is forecast to continue expanding rapidly amid rising public infrastructure spending and strong private-sector credit growth, backed by solid corporate sector balance sheets," the World Bank says.

"A strong performance in 2023 was underpinned by robust public investment growth and vibrant services activity, thanks to resilient domestic demand for consumer services and exports of business services. In contrast, merchandise exports slowed, reflecting weak external demand," it says.

As the world nears the midpoint of what was intended to be a transformative decade for development, the global economy is set to rack up a sorry record by the end of 2024—the slowest half-decade of GDP growth in 30 years, according to the World Bank report.

The global financial institution says that the risk of a global recession has receded, largely because of the strength of the U.S. economy. “Meanwhile, the medium-term outlook has darkened for many developing economies amid slowing growth in most major economies, sluggish global trade, and the tightest financial conditions in decades,” it says.

Global trade growth in 2024 is expected to be only half the average in the decade before the pandemic. Global growth is projected to slow for the third year in a row—from 2.6% last year to 2.4% in 2024, almost three-quarters of a percentage point below the average of the 2010s.

Developing economies are projected to grow just 3.9%, more than one percentage point below the average of the previous decade. “After a disappointing performance last year, low-income countries should grow 5.5%, weaker than previously expected. By the end of 2024, people in about one out of every four developing countries and about 40% of low-income countries will still be poorer than they were on the eve of the COVID pandemic in 2019. In advanced economies, meanwhile, growth is set to slow to 1.2% this year from 1.5% in 2023,” says the World Bank.