World Bank Increases India's Growth Forecast Amid Agri Recovery and Rural Demand

The World Bank has raised its growth forecast for India to 7% from 6.6%, thanks to recovery in agriculture and increased rural demand. This aligns with projections by the IMF and ADB. Factors supporting the increase include improved monsoon, private consumption, and rising exports. India's GDP outlook remains robust.

The World Bank on Tuesday raised its growth forecast for the Indian economy to 7 percent from an earlier estimate of 6.6 percent, citing a recovery in the agriculture sector and increased rural demand.

This updated forecast aligns with projections by the International Monetary Fund (IMF) and the Asian Development Bank (ADB), both of which have also adjusted their forecasts for India to 7 percent for the financial year ending March 2025.

According to the Economic Survey, India's real GDP is expected to grow at a rate of 6.5-7 percent in the 2024-25 fiscal year. However, the Reserve Bank of India (RBI) estimates a slightly higher growth rate of 7.2 percent for the current financial year.

The World Bank's revised forecast, up by 40 basis points from its June estimate, is attributed to favorable monsoon conditions, increased private consumption, and rising exports, according to senior economist Ran Li.

Despite challenging global conditions, the World Bank expects India's medium-term outlook to remain positive, with a forecasted growth rate of 7 percent in FY25, and continued strong performance in FY26 and FY27.

Boosted by a robust revenue growth and fiscal consolidation, India's debt-to-GDP ratio is projected to decline from 83.9 percent in FY24 to 82 percent by FY27, with the current account deficit remaining between 1-1.6 percent of GDP up to FY27.

World Bank's country director, Auguste Tano Kouame, noted that India's declining inflation and robust growth will help reduce extreme poverty. He also emphasized the need for India to diversify its export basket and harness global trade potential to further boost growth.

The India Development Update report highlights that recovery in agriculture will help offset a slight downturn in industry performance, while the services sector is expected to remain robust. It also underscores the importance of reducing trade costs and barriers to meet the USD 1 trillion merchandise export goal by 2030.

The report points out opportunities for India in the global value chains, especially in the post-pandemic era, although rising protectionist measures could pose challenges. Recent Free Trade Agreements (FTAs) with the UAE and Australia are seen as beneficial, although India's absence from major trade blocs like the RCEP is noted.

(With inputs from agencies.)