The election year in India has commenced and everyone is keenly observing the ongoing developments for this mammoth exercise which is scheduled during the year. The economic growth forecasts for the Indian economy appear to be stable despite the numerous challenges observed during the year. The BRICS block of countries have expanded their membership by admitting 5 new countries early this year.
World Bank – The World Bank recently released its Global Economic Prospects, January 2024 report. As per the report, in India, the slowdown in growth to 7.2 percent in fiscal year (FY) 2022/23, which ended in March 2023, was primarily due to a weakening post-pandemic rebound, particularly in private investment and consumption. However, a strong performance in 2023 was underpinned by robust public investment growth and vibrant services activity, thanks to resilient domestic demand for consumer services and exports of business services. In contrast, merchandise exports slowed, reflecting weak external demand. Headline consumer price inflation remained within monetary authorities’ target band of 2-6 percent throughout most of 2023, with policy rates being kept unchanged since February 2023.
India is anticipated to maintain the fastest growth rate among the world’s largest economies, but its post-pandemic recovery is expected to slow, with estimated growth of 6.3 percent in FY2023/24 (April 2023 to March 2024) which is o.1% lower than the October 2023 forecast (reported by Asia Law Portal here). Growth is then expected to recover gradually, edging up to 6.4 percent in FY2024/25 and 6.5 percent in FY2025/26. Investment is envisaged to decelerate marginally but remain robust, supported by higher public investment and improved corporate balance sheets, including in the banking sector. Private consumption growth is likely to taper off, as the post-pandemic pent-up demand diminishes and persistent high food price inflation is likely to constrain spending, particularly among low income households. Meanwhile, government consumption is expected to grow slowly, in line with the central government’s efforts to lower the share of current spending.
International Monetary Fund – recently released its World Economic Outlook Update, January 2024: Moderating Inflation and Steady Growth Open Path to Soft Landing. The report states that growth in India is projected to remain strong at 6.5 percent in both 2024 and 2025, with an upgrade from WEO October (as reported by Asia Law Portal here) of 0.2 percentage point for both years, reflecting resilience in domestic demand. In India, strong domestic demand underpinned another increase in IMF’s growth estimate.
UN Report – The United Nations Department of Economic and Social Affairs recently published its World Economic Situation and Prospects 2024 report. The report mentions that India remains the fastest-growing large economy. Growth in India is projected to reach 6.2 per cent in 2024, slightly lower than the 6.3 per cent estimated for 2023, supported by robust domestic demand and strong growth in the manufacturing and services sectors. India registered strong investment performance in 2023, driven by government infrastructure projects and multinational investments. While manufacturing and services sectors will continue to support the economy, erratic rainfall patterns will likely dampen agricultural output. In India, August was one of driest months in four decades, impacting the production of key staple crops in the most affected areas. In India, labour market indicators improved over the year, with labour force participation increasing in August to its highest rate since the onset of the pandemic. The unemployment rate averaged 7.1 per cent in September, the lowest value in a year, with unemployment in rural areas falling despite weaker monsoon rains. Youth unemployment rates declined significantly during the first quarter of 2023 to the lowest value since the pandemic.
BRICS – The BRICS bloc of top emerging economies, including India, Russia and China, has announced induction of five full members into it as part of an attempt to expand its strategic heft against the backdrop of Western dominance in world affairs. As Russia assumed the presidency of BRICS, its President Vladimir Putin said at the beginning of January that the grouping has become a 10-nation body now with Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates joining it as new members. The grouping took shape in September 2006 and it originally comprised Brazil, Russia, India and China (BRIC). It was renamed as BRICS after South Africa was accepted as a full member in September 2010. With Brazil, Russia, India, China and South Africa as its members, BRICS represents a quarter of the global economy and it has been a major engine of global economic growth over the years.
