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United Nations Forecasts India’s Economy to Grow by 6.5% in 2024

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Introduction: The UN Trade and Development (UNCTAD) report, released on Tuesday, highlighted India’s growth rate of 6.7% in 2023 and projected a steady expansion of 6.5% in 2024, maintaining its position as the fastest-growing major economy globally.

In a recent report by the United Nations, India’s economic growth is anticipated to reach 6.5% in 2024, with multinational companies expanding their manufacturing operations in the country expected to positively impact Indian exports.

Continued Growth Momentum

The UN Trade and Development (UNCTAD) report, released on Tuesday, highlighted India’s growth rate of 6.7% in 2023 and projected a steady expansion of 6.5% in 2024, maintaining its position as the fastest-growing major economy globally.

“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”, the report said, adding that these factors are expected to continue to support growth in India in 2024.

Multinational Investment Trends

Multinationals are increasingly focusing on India as a manufacturing hub to diversify their supply chains, a trend paralleling China’s shift. This shift is expected to boost Indian exports, while moderating commodity prices could alleviate the country’s import bill.

“In the outlook, an increasing trend of multinationals extending their manufacturing processes into India 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”, it said.

The UNCTAD report also stated that 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.

Regional Economic Dynamics

The flagship ‘2024 Financing for Sustainable Development Report’ emphasized robust investment in South Asia, particularly in India, driven by growing interest from multinational companies seeking alternative manufacturing bases.

While India’s economy thrives, other South Asian countries, like Bangladesh, Pakistan, and Sri Lanka, are facing more subdued growth due to IMF programs enforcing tight monetary policies and fiscal austerity measures, according to the report.

Global Economic Outlook

The global growth forecast for 2024 stands at 2.6%, slightly lower than the previous year, marking the third consecutive year of slower growth post-pandemic. Despite some positive signs, challenges such as trade disruptions, climate change, low growth, under-investment, and inequalities persist.

“Some economies – including large ones, such as China, India, Indonesia, the Russian Federation, the United States, among others – escaped the financial trouble that loomed earlier in the year,” the report said, adding that as a result, the world economy grew 2.7 per cent, just 0.2 percentage point more than the threshold of 2.5 per cent that is often associated with a global recessionary phase.

The report said that China’s economy, projected to grow 4.9 per cent in 2024, faces various challenges including external uncertainties, housing market issues, and subdued consumption, while European countries like Germany and Italy struggle with weak economic activity.

As per the report, the United States’ growth is expected to slow, with Argentina facing severe inflation, and Brazil’s economic momentum dampened by external pressures and reliance on commodities. North America remains relatively resilient, though challenges continue, the report mentions.

On the other hand, Africa is expected to grow at 3.0% in 2024, with armed conflicts and climate impacts posing challenges. Nigeria, Egypt, and South Africa, Africa’s largest economies, are underperforming. Oceania, particularly Australia, is forecasted to experience subdued growth.

 India’s Resilience

The UNCTAD report comes at a time when the International Monetary Fund, in its latest edition of the World Economic Outlook released on Tuesday, projected India’s growth to remain strong at 6.8% in 2024 and 6.5%, driven by strong domestic demand and a growing working-age population, with the robustness reflecting continuing strength in domestic demand and a rising working-age population.

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

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