NEW DELHI — The Indian economy continues to grow at a healthy pace despite challenging global conditions, a World Bank report said on Tuesday, adding that the country's medium-term outlook remains positive.
Amid tough external conditions, the country remains the fastest-growing major economy and grew at a rapid pace of 8.2 percent in FY23/FY24.
Growth is forecast to reach 7 per cent in FY24/FY25 and remain strong in FY25/FY26 and FY26/FY27, said the World Bank.
With robust revenue growth and further fiscal consolidation, the debt-to-GDP ratio is projected to decline from 83.9 per cent in FY23/24 to 82 per cent by FY26/27. the current account deficit is expected to remain at around 1-1.6 per cent of GDP up to FY26/FY27, according to the World Bank’s latest India Development Update (IDU).
“India’s robust growth prospects along with declining inflation will help to reduce extreme poverty,” said Auguste Tano Kouame, World Bank's Country Director in India.
The country can boost its growth further by harnessing its global trade potential. In addition to IT, business services and pharma where it excels, India can diversify its export basket with increased exports in textiles, apparel, and footwear sectors, as well as electronics and green technology products,” Kouame mentioned.
Growth in the country was boosted by public infrastructure investment and an upswing in household investments in real estate. On the supply side, it was supported by a buoyant manufacturing sector, which grew by 9.9 per cent, and resilient services activity, which compensated for underperformance in agriculture.
Reflecting these trends, urban unemployment has improved gradually since the pandemic, especially for female workers. Female urban unemployment fell to 8.5 per cent in early FY24/25.
With a narrowing of the current account deficit and strong foreign portfolio investment inflows, foreign exchange reserves reached an all-time high of $670.1 billion in early August.
The report also highlighted the critical role of trade for boosting growth, emphasising that India has boosted its competitiveness through the National Logistics Policy and digital initiatives that are reducing trade costs.
However, reach its $1 trillion merchandise exports goal by 2030, India needs to diversify its export basket and leverage global value chains, the report mentioned.
According to Nora Dihel and Ran Li, senior economists and co-authors of the report, to create more trade-related jobs, India can Integrate more deeply into global value chains which will also create opportunities for innovation and productivity growth.