UNCTAD raises India’s growth forecast to 6.5%

Indian economy is likely to carry forward the momentum in 2024, growing 6.5% compared with 6.7% in the previous year, United Nations Trade and Development (UNCTAD) noted in its latest report released Tuesday, revising India’s growth forecast by 0.3 percentage points.

The global trade body pointed out that the factors that helped India grow by 6.7% in 2023 will help the economy achieve a similar growth rate in the current year as well.

“The expansion in 2023 was driven by strong public investment outlays as well as the vitality of the services sector, which benefitted from robust local demand for consumer services and firm external demand for the country’s business services exports. These factors are expected to continue to support growth in 2024,” it pointed out.

Other international bodies have revised their growth forecasts, given India’s performance in the first nine months of FY24.

The economy expanded 8.2% between April-December 2023, according to government data.

UNCTAD notes India’s exports are also likely to perform better with countries looking to diversify their supply chains.

“In the outlook, an increasing trend of multinationals extending their manufacturing processes into India in an effort to diversify their supply chains will also have a positive impact on Indian exports, while moderating commodity prices will be beneficial to the country’s import bill,” it noted.

Data released Monday showed that India’s exports were down 3.1% in FY24 compared with the previous year, but a pick-up was witnessed in the January-March period. Merchandise exports in March, at $41.7 billion, were the highest in 12 months.

Commerce Secretary Sunil Barthwal pointed out that the positive momentum will likely continue in the current fiscal year.

“The Reserve Bank of India is expected to keep interest rates constant in the near term, while restrained public consumption spending will be offset by strong public investment expenditures,” UNCTAD highlighted in its report as factors supporting Indian growth.

Experts indicate that the Reserve Bank is likely to stay in a wait-and-watch mode as it assesses geopolitical scenarios and the Fed’s guidance before instituting a rate cut.

UNCTAD was more critical of the global outlook. It raised its growth forecast for 2024 to 2.6% from 2.5% projected earlier but noted that global growth is likely to slow down further from 2.7% in 2023 and remain below the pre-pandemic average of 3.2%.

“Policy discussions continue to centre on inflation, conveying confidence that anticipated monetary easing will heal the world’s economic woes. Meanwhile, the pressing challenges of trade disruptions, climate change, low growth, underinvestment and inequalities are growing more serious,” the report said.

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