India is poised to maintain its position as the fastest-growing major economy, with a projected steady growth rate of 6.7% over the next three years, including the current financial year, according to the World Bank’s latest Global Economic Prospects report. This report highlights India’s impressive economic trajectory amidst a global landscape of moderate growth.
Current Growth Estimates
For the fiscal year 2023/24, the World Bank estimates that India’s growth has surged to 8.2%, which is 1.9 percentage points higher than earlier projections made in January. This substantial growth rate underscores India’s robust economic performance and resilience.
Global and Regional Growth Projections
On a global scale, growth is expected to stabilize at 2.6% in 2024 and edge up slightly to an average of 2.7% in 2025-26. This is significantly lower than the pre-pandemic average growth rate of 3.1%. The report suggests that over 2024-26, countries accounting for more than 80% of the world’s population and global GDP will grow more slowly compared to the decade before the COVID-19 pandemic.
In the South Asia region, growth is projected to decelerate from 6.6% in 2023 to 6.2% in 2024, primarily due to a moderation in India’s growth from its high base. However, regional growth is forecasted to remain steady at 6.2% in 2025-26, supported by robust economic performances in Bangladesh, Pakistan, and Sri Lanka, despite a slower pace than in recent years.
India’s Economic Outlook
Despite a projected moderation, India will continue to lead as the fastest-growing economy among the world’s largest economies. After a peak in FY2023/24, the country’s growth rate is expected to stabilize at an average of 6.7% per year over the three fiscal years starting from FY2024/25. This slight moderation is attributed to a slowdown in investment from recent high levels.
Investment and Consumption Trends
Investment growth in India is anticipated to remain strong, bolstered by substantial public investment and robust private investment. Private consumption growth is also expected to benefit from a recovery in agricultural production and declining inflation. However, government consumption is projected to grow slowly, aligning with the government’s objective of reducing current expenditure relative to GDP.
Inflation and Interest Rates
The World Bank report indicates that global inflation is expected to moderate to 3.5% in 2024 and 2.9% in 2025, although the decline will be slower than previously anticipated. Consequently, many central banks are likely to be cautious in lowering policy interest rates. Global interest rates are projected to remain high, averaging about 4% over 2025-26, which is roughly double the average from 2000-2019.
In India, inflation has remained within the Reserve Bank’s target range of 2 to 6% since September 2023. However, regional inflation remains elevated, driven by high food price inflation due to local supply disruptions and increased energy prices.
The Bottom Line
India’s economic outlook remains strong, with steady growth projected over the next few years. While global and regional challenges persist, India’s robust investment and consumption patterns, coupled with controlled inflation, position it well for sustained economic leadership among major economies. As the world navigates post-pandemic recovery, India’s economic performance serves as a beacon of resilience and growth.
