United Nations raises India's 2024 growth projections citing strong investment, consumption

NEW DELHI: The United Nations upwardly raised India's economic growth projections for 2024 from 6.2 per cent to 6.9 per cent mainly driven by strong public investment and resilient private consumption, joining IMF that recently upped the country's growth forecast.

United Nations, in its mid-year update, titled World Economic Situation and Prospects, reaffirmed that India is set to remain the fastest-growing major economy this fiscal. Separately, the IMF, in its latest outlook, raised India's growth projections for 2024 from 6.5 per cent to 6.8 per cent.

Although India's subdued external demand will continue to weigh on merchandise export growth, pharmaceuticals and chemicals exports are expected to expand strongly, the UN report asserted.

Citing IMF projections, Finance Minister Nirmala Sitharaman today at an industry event said India is estimated to contribute 18 per cent to global growth in five years beginning 2023.

For China, the UN raised the growth forecast by just 10 basis points from 4.7 per cent to 4.8 per cent. According to the UN report, the world economy is now forecast to grow by 2.7 per cent in 2024, which is an increase of 0.3 percentage points from the forecast in January, and 2.8 per cent in 2025, which is an increase of 0.1 percentage points.

The upward revisions mainly reflect improved prospects in the US and several large developing economies, notably India and Brazil, it said.

However, the economic outlook for many African countries has deteriorated since the UN report, it said.

On average, global growth in the coming years is expected to remain below the average of 3.2 per cent during 2010-2019.

"Several large developing economies - Indonesia, India, and Mexico - are benefiting from strong domestic and external demand. In comparison, many economies in Africa and Latin America and the Caribbean are on a low-growth trajectory, facing high inflation, elevated borrowing costs, persistent exchange rate pressures and lingering political instability."

Particularly for India, it said labour market indicators have also improved amid robust growth and higher labour force participation. By contrast, the unemployment rate remains persistently high in South Africa at above 30 per cent. In Brazil, the labour market is projected to lose some momentum in 2024.

South Asia's economic outlook is expected to remain strong, supported by a robust performance of India's economy and a slight recovery in Pakistan and Sri Lanka.

Regional GDP is projected to grow by 5.8 per cent in 2024, an upward revision of 0.6 percentage points since the January update and 5.7 per cent in 2025, below the 6.2 per cent recorded in 2023.

"However, still tight financial conditions and fiscal and external imbalances will continue to weigh on South Asia's growth performance. In addition, potential increases in energy prices amid geopolitical tensions and the ongoing disruption in the Red Sea pose a risk to the regional economic outlook."

The size of India's GDP is currently ranked 5th, after the US, China, Germany, and Japan. It overtook the UK in 2022.

Citing various macroeconomic parameters that are doing pretty well, India's G20 Sherpa and former CEO of Niti Aayog Amitabh Kant projected that the country is all set to overtake Japan as 4th largest economy in the world by 2025.

Just a decade ago, Indian GDP was the eleventh largest in the world. Currently, India's GDP is estimated to be around USD 3.7 trillion.

Coming back to the UN report, consumer price inflation in India is projected to decelerate from 5.6 per cent in 2023 to 4.5 per cent in 2024, staying within the central bank's 2 to 6 per cent medium-term target range.

In April 2024, India's retail inflation was at 4.83 per cent.

Despite some moderation, food prices remained elevated in the first quarter of 2024, especially in Bangladesh and India, the United Nations said.