UN upgrades India’s 2024 GDP growth forecast to 6.9%

India is expected to see 6.9% growth in 2024 and 6.6% in 2025, according to the World Economic Situation and Prospects (WESP) mid-2024 report. The United Nations (UN) has raised its growth forecast for India's economy in 2024, primarily driven by robust public investment and strong private consumption. Despite weak external demand affecting merchandise exports, the pharmaceuticals and chemicals sectors are anticipated to perform well.

The growth forecast of 6.9% represents an uptick from the 6.2% estimate provided by the UN in January. The January WESP report had estimated a 6.2% growth for 2024, fuelled by strong domestic demand and growth in manufacturing and services. The 2025 projection remains at 6.6%, as per the report.

The update also predicts that consumer price inflation in India will slow from 5.6% in 2023 to 4.5% in 2024, remaining within the central bank's target range of 2-6%. This reduction in inflation is partly due to easing currency depreciation pressures and moderating agricultural commodity prices, associated with the weakening effects of El Niño. Similarly, inflation across South Asia is expected to decrease further in 2024, ranging from 2.2% in the Maldives to 33.6% in Iran. Nonetheless, food prices remained high in the first quarter of 2024, particularly in Bangladesh and India.

"India's labour market indicators have improved, reflecting strong growth and higher labour force participation. The government aims to gradually reduce the fiscal deficit while boosting capital investment," says the report.

South Asia's economic outlook is strong, buoyed by India's performance and modest recoveries in Pakistan and Sri Lanka, it adds. The region's GDP is projected to grow by 5.8% in 2024, an upward revision of 0.6 percentage points since January, and by 5.7% in 2025, still lower than the 6.2% in 2023. However, financial constraints and fiscal and external imbalances will continue to challenge the region's growth. Rising energy prices due to geopolitical tensions and disruptions in the Red Sea could also impact the outlook.

Globally, the economy is now expected to grow by 2.7% in 2024, an increase of 0.3 percentage points from January, and by 2.8% in 2025, up 0.1 percentage points. This improvement is largely due to a better outlook for the United States and major emerging economies like India and Brazil.

Large developing economies such as Indonesia, India, and Mexico are benefiting from strong domestic and external demand. Conversely, many African and Latin American countries face low growth, high inflation, and other economic pressures.

Global trade is expected to recover in 2024, initially boosted by the clearing of inventory backlogs from previous supply-chain disruptions. China's foreign trade has exceeded expectations early in 2024, driven by exports to emerging markets like Brazil, India, and Russia. However, ongoing geopolitical tensions and rising freight costs continue to challenge global trade.