The expected economic growth of India in 2023-24

India has shown remarkable resilience amidst global challenges, as per the latest India Development Update (IDU) by the World Bank. Despite a tough global environment, India’s economy grew at 7.2% in FY22/23, making it one of the fastest-growing major economies.

Key Drivers of Growth

• Robust Domestic Demand: India’s strong internal demand played a vital role in its economic growth.
• Infrastructure Investments: Significant investments in public infrastructure boosted economic activity.
• Financial Sector Strength: The financial sector grew stronger, contributing to the overall economic resilience.
• Increased Bank Credit: Bank credit grew by 15.8% in the first quarter of FY23/24, indicating a healthy financial environment.

Challenges and Global Factors

• Global Headwinds: Challenges like high global interest rates, geopolitical tensions, and sluggish global demand are expected to persist.
• Projected Growth: India’s GDP growth for FY23/24 is forecasted to be 6.3% due to challenging external conditions and reduced pent-up demand.
• Sectoral Growth: Despite challenges, the service sector is anticipated to grow by 7.4%, and investment is projected to remain robust at 8.9%.

Inflation and Fiscal Measures

 

• Inflation Spike: Inflation rose to 7.8% in July due to increased food prices, but it’s expected to normalize gradually.
• Fiscal Outlook: Fiscal consolidation is expected to continue, with the fiscal deficit projected to decline from 6.4% to 5.9% of GDP. Public debt is stabilizing at 83% of GDP.
• External Balance: The current account deficit is expected to narrow to 1.4% of GDP, supported by foreign investment flows and significant foreign reserves.

Future Strategies

• Public-Private Collaboration: Tapping into public spending to encourage private investments will create favorable conditions for India to seize global opportunities and achieve higher growth.
• Policy Recommendations: The World Bank suggests boosting private sector investments and capitalizing on opportunities arising from the global energy transition to accelerate growth.

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