World Bank projects India's growth to reach 7.5% in FY 23-24

In its latest South Asia Development Update, the World Bank has projected robust growth for the region in 2024, with a forecasted 6.0 percent expansion, driven predominantly by India's strong economic performance. According to the report released on Tuesday, India, the region's economic powerhouse, is expected to lead the growth trajectory with an anticipated output expansion of 7.5 percent in FY23-24, before stabilizing to 6.6 percent over the medium term. This growth is largely attributed to the resilience seen in the services and industrial sectors.

Despite the optimistic outlook, the report highlighted persistent structural challenges that could impede sustained growth in the region. Martin Raiser, World Bank Vice President for South Asia, cautioned that while the short-term prospects appear promising, fragile fiscal positions and increasing climate shocks pose significant threats to future growth. Raiser emphasized the urgent need for countries to implement policies aimed at bolstering private investment and enhancing employment opportunities to fortify growth resilience.

The report also sheds light on the economic trajectories of other South Asian nations. It projects a mild recovery for Pakistan with a growth rate of 2.3 percent in FY24-25 and anticipates a growth increase to 2.5 percent in 2025 for Sri Lanka, supported by recoveries in reserves, remittances, and tourism. Bangladesh is expected to experience a rise in output by 5.7 percent in FY24/25, although challenges such as high inflation and trade restrictions may dampen economic activity.

To address these challenges and foster sustainable growth, the World Bank recommends a comprehensive set of policies. These include enhancing trade openness, facilitating access to finance, improving business climates and institutions, easing financial sector restrictions, enhancing education, and promoting women's economic participation. Such measures, the report contends, would not only stimulate firm growth and employment but also elevate productivity and create space for public investments in climate adaptation.

Earlier forecasts by Morgan Stanley align with the World Bank's optimism regarding India's economic trajectory. The financial institution revised its GDP growth projections upwards for FY24 to 7.9 percent and for FY25 to 6.8 percent, citing India's inherent strength and stability as key factors driving the upward trend.