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World Bank lifts India’s growth forecast to 6.6%; says growth reliant on public spending, private investment is weak

News Agencies

New Delhi: The World Bank on Tuesday upgraded its FY25 economic growth forecast for the Indian economy by 20 basis points to 6.6 per cent, primarily because of “upward revisions to investment growth”.
In its latest bi-annual South Asia Development Update, the multilateral lender pegged India’s FY24 growth rate at 7.5 per cent, a tad lower than 7.6 per cent estimated by the National Statistical Office.
“South Asia’s growth outlook is somewhat stronger than in the previous edition of this report, by 0.4 percentage points for 2024 and 0.3 percentage points for 2025. This primarily reflects upward revisions to investment growth in India and somewhat faster-than-anticipated rebounds from last year’s recessions in Pakistan and Sri Lanka…Growth (in India) is expected to moderate to 6.6 per cent in FY2024-25 before picking up in subsequent years as a decade of robust public investment yields growth dividends,” the April update notes.
The World Bank said that growth in services and industry is expected to remain robust in India, with the latter aided by strong construction and real estate activity while inflationary pressure is expected to subside, thus creating more policy space for easing financial conditions.
“Over the medium term, the fiscal deficit and government debt are projected to decline, supported by robust output growth and consolidation efforts by the central government,” the update notes.
However, the report pointed out that India’s growth pickup in the near term is reliant on the public sector whereas private investment, in particular, continues to be weak. “Efforts to rein in elevated debt, borrowing costs, and fiscal deficits may eventually weigh on growth and limit the government’s ability to respond to increasingly frequent climate shocks,” it cautioned.

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