India remains a bright spot, likely to grow 6.7% in 2024: UNDESA report

According to the United Nations Department of Economic and Social Affairs (UNDESA), domestic demand will drive India's economic growth in 2023, while higher interest rates and lower external demand will continue to weigh on investment and exports during the calendar year.

In its mid-year update to its World Economic Situation and Prospects report, the UNDESA maintained its growth predictions for India at 5.8% and 6.7% for the calendar years 2023 and 2024, respectively.

“India’s economy, the largest in the (South Asian) region, is expected to grow by 5.8% in 2023 and 6.7% in 2024, driven by resilient domestic demand." Potential droughts and floods also represent a serious risk to the economic outlook because the (South Asian) region is extremely prone to harsh climatic conditions, the study indicated.

The UN arm raised its global economic growth forecast for 2023 to 2.3%, up from 1.9% previously, but reduced its forecast for 2024 to 2.5%, down from 2.7%.

Furthermore, the report notes that the Reserve Bank of India's rate-hiking spree, which has resulted in a cumulative increase of 250 basis points in the repo rate since May 2022, will finally bear fruit, as headline inflation is expected to remain well below the central bank's upper tolerance limit of 6% in 2023.

The study stated, “Inflation in India is expected to decelerate to 5.5% in 2023 as global commodity prices moderate and slower currency depreciation reduces imported inflation”.

According to the report, the labour markets in developed economies have shown to be remarkably resilient, with employment rates at record high levels helping to sustain strong household spending that results in pay increases and making it more difficult for central banks to control inflation. 

Fitch Ratings reiterated its lowest investment grade rating with a stable outlook for India's long-term sovereign debt, stating that growth prospects in India have improved as the private sector appears to be prepared for better investment growth.

According to the rating agency, India will be one of the world's fastest-growing sovereigns, with a 6% GDP growth prediction for 2023-24, supported by solid investment prospects.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.