The World Bank has revised its projections for the Indian economy, forecasting a growth rate of 7.5% in 2024, an increase of 1.2% from previous estimates.
This growth contributes to a strong outlook for South Asia, with the region expected to grow at 6.0% in 2024, driven by India’s robust performance and recoveries in Pakistan and Sri Lanka.
Fastest growing in region
The World Bank’s South Asia Development Update predicts South Asia to maintain its position as the fastest-growing region globally for the next two years, with a projected growth of 6.1% in 2025.
India is highlighted as a significant contributor to the region’s economy, with expected output growth of 7.5% in FY 2023-24, followed by a moderate decrease to 6.6% in the medium term.
The services and industry sectors are anticipated to sustain robust activity.
Economic performance
India’s economic performance in Q4 of 2023 surpasses expectations, driven by investments and government spending.
Favorable financial conditions are noted, with domestic credit issuance growing by 14% year-on-year in December 2023.
The nonperforming-loan ratio has decreased to 3.2%, and regulatory capital adequacy surpasses requirements.
Optimizing demographic dividend
“South Asia is failing right now to fully capitalize on its demographic dividend. This is a missed opportunity,” said Franziska Ohnsorge, World Bank Chief Economist for South Asia.
If the region employed as large a share of the working-age population as other emerging markets and developing economies, its output could be 16% higher, Ohnsorge said.
Challenges ahead
While short-term growth prospects for South Asia appear promising, fiscal vulnerabilities and climate-related shocks pose challenges to the region’s resilience.
Strengthening private investment and employment growth are crucial to bolstering economic resilience.
