India’s economic growth prospects hinge on pragmatic measures

India is the most populous country in the world with one-sixth of the world's population. The urban population is 36.4% of the total population (2023). The rate of urbanization is 2.33% annual rate of change (2020-25) Moody's raised India's GDP growth estimate for 2024 to 6.8 per cent from 6.1 per cent. The boost in economic growth during the October-December quarter, which reached 8.4 per cent, was attributed to a significant decrease in key subsidies. The growth tempo is projected to remain strong at 6.5% in both 2024 and 2025, with an upgrade from October by 0.2 percentage point for both years. The International Monetary Fund (IMF) opined that the global economy continues to display remarkable resilience; it is now in the final descent toward a 'soft landing' with inflation declining steadily and growth holding up. IMF on Tuesday edged its forecast for global economic growth higher, upgrading the outlook for both the US and China - the world's two largest economies - and citing faster-than-expected easing of inflation.

On his part, the Reserve Bank of India (RBI) governor Shaktikanta Das said that he expected India's GDP growth to touch 7% in FY25. For the current fiscal year ending March 31, India's economy is expected to grow at 7.3%, 30 basis points higher than what RBI had forecast in December, as per the government's recent first advance estimates. The IMF said the improved outlook was supported by stronger private and public spending despite tight monetary conditions, as well as increased labour force participation, mended supply chains and cheaper energy and commodity prices. The IMF forecast global growth of 3.1% in 2024, up two-tenths of a percentage point from its October forecast, and said it expected unchanged growth of 3.2% in 2025. The historical average for the 2000-2019 period was 3.8%. It forecast global trade growth of 3.3% in 2024 and 3.6% in 2025, well below the historical average of 4.9%, with gains weighed down by some 3,000 trade restrictions that were imposed in 2023. It said that the average oil prices would drop 2.3% in 2024 as against the 0.7% decline it had predicted in October. The prices were expected to drop 4.8% next year.

The global body has said that commodity price spikes from geopolitical shocks, including continued attacks on shipping in the Red Sea, could prolong tight monetary conditions. India's unemployment rate stood at a staggering 23.22%, while that of stood at 11.3% and Bangladesh's 12.9%, as per a World Bank report from 2022. Global brokerage Jefferies sees India becoming the third largest economy by 2027 on the back of consistent GDP growth rate, supportive geopolitics, and continued reforms. The economy is seen expanding more than $ four trillion in 2024 and thereafter moving to the next orbit in 2025. Inflation trajectory is expected to stabilise around 4.5%, repo rate expected to come down around 5.5% by end 2024, says industry body PHDCCI. Over the next four years, India’s GDP is likely to touch $5 trillion, making it the third largest economy by 2027, by being the fastest growing large economy with the tailwinds of demographics (consistent labour supply), improving institutional strength and streamlining governance.