WB raises FY25 GDP growth forecast to 7%

Amid challenging external conditions, World Bank expects India’s medium-term outlook to remain positive. Growth is forecast to reach 7% in FY25 and remain strong in FY26 and FY27

Supporting Factors

♦ Earlier in June prediction was 6.6%

♦ Improvement in monsoon

♦ Private consumption

♦ Rising exports

New Delhi: The World Bank on Tuesday raised the growth forecast for the Indian economy to 7 per cent from an earlier projection of 6.6 per cent in the current fiscal, helped by recovery in the agri sector and pick-up in rural demand. This is in line with projections by the International Monetary Fund (IMF) and Asian Development Bank (ADB). Both multilateral funding agencies have raised their forecast to 7 per cent for the financial year ending March 2025. According to Economic Survey, the country’s real gross domestic product (GDP) will grow at 6.5-7 per cent in 2024-25.

However, the Reserve Bank of India (RBI) estimates a higher 7.2 per cent for the current financial year. It is to be noted that the World Bank has raised the GDP forecast by 40 basis points from earlier estimates of 6.6 per cent for FY25 released in June. An increase in GDP forecast is supported by improvement in monsoon, private consumption and rising exports, World Bank senior economist Ran Li said. The growth rate of India, which accounts for the bulk of the South Asia region, is expected to remain strong at 7 per cent in 2024-25, the World Bank said in the India Development Update.

“Amid challenging external conditions, the World Bank expects India’s medium-term outlook to remain positive. Growth is forecast to reach 7 per cent in FY25 and remain strong in FY26 and FY27,” it said.

With robust revenue growth and further fiscal consolidation, it said, the debt-to-GDP ratio is projected to decline from 83.9 per cent in FY24 to 82 per cent by FY27. The current account deficit is expected to remain around 1-1.6 per cent of the GDP up to FY27. India’s robust growth prospects, along with declining inflation rate will help to reduce extreme poverty, said World Bank’s country director Auguste Tano Kouame.

“India 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,” he said.