World Bank Boosts India’s Growth Forecast to 7% Amid Infrastructure Investments

The World Bank increased its growth forecast for India to 7% for the current financial year, up from the previous estimate of 6.6%. This upgrade is attributed to increased government spending on infrastructure.

According to the World Bank’s India Development Update report, the growth was driven by investments in public infrastructure and a rise in household spending on real estate. On the supply side, strong growth in the manufacturing sector (9.9%) and steady service performance helped balance out weaker agricultural performance.

Auguste Kouame, the World Bank’s country director for India, mentioned that India is adapting well to a tough environment and isn’t at risk of falling into the middle-income trap if it keeps up with its current policies and reforms. He highlighted India’s success despite challenges and said he doesn’t expect growth to slow enough to cause this issue.

India grew 8.2% in FY 2023-24, making it the fastest-growing major global major economy. However, according to recent government data, growth dropped to a 15-month low of 6.7% in April-June 2024-25, mainly due to weak performance in agriculture and services.

The International Monetary Fund has increased its GDP growth forecast for India for FY25 to 7%. Moody’s Ratings has also raised its GDP growth projection for India in the calendar year 2024 to 7.2%, up from the previous estimate of 6.8%.

The World Bank forecasts a positive medium-term outlook for India, expecting GDP growth of 6.7% for FY26 and FY27. The report mentioned that while the urban job market has slowly improved since the pandemic, youth unemployment remains high at about 17%.

Kouame noted that India’s recent budget measures to tackle unemployment are a step in the right direction, but more actions are needed. He suggested India should focus on expanding into less advanced markets with job-creating products, similar to how China diversified its exports globally.

The report also highlighted a decline in India’s direct export-related employment, which dropped from 9.5% of total jobs in 2012 to 6.5% in 2020. World Bank economist Aurelien Kruse commented that while the government’s production-linked incentive scheme is a positive move, it has limits given India’s large economy. He emphasised the need to address the root causes to achieve significant and systemic changes. The World Bank predicts inflation to be 4.5% for FY25, dropping to 4.1% in FY26 and 4% in FY27.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.