Indian Economy to grow by 6.6% in 2024-25 : World Bank

The World Bank, in its bi-annual report “South Asia Development Update” released on 2 April 2024, has increased its growth rate forecast for the Indian economy for 2024-25 to 6.6 per cent. In the last report, it estimated a growth rate of 6.4% for the Indian economy in FY 25. The World Bank cited increased public investment in the economy as a reason for upgrading the Indian economic growth rate.

However, the World Bank forecasted a growth rate of 7.5% for 2023-24, which is lower than that of the National Statistical Office (NSO) 7.6 per cent.

Forecast about Indian economy growth rate by major institutions/agencies.

Main Highlights of the World Bank report

The World Bank says that Indian economic performance will be moderate in 2024-25 before picking up pace in subsequent years. It has mentioned certain reasons for an anticipated higher growth rate in the future.

• Public investment (government investment) in the infrastructure sector will enable the Indian economy to attain a higher growth rate in the future. Infrastructure development is considered to have a multiplier effect on the economy, creating additional demands for jobs in the economy.
• Due to the pick up in the construction and real estate sector, the report expects a strong growth in the service and Industrial sectors.
• It expects the fiscal deficit of the government to decline and government borrowing to be in control. This will lead to a decline in inflation, enabling more investment in the economy.

Problem areas of the Indian economy 

• According to the report, the private sector investment is weak and the investment is mainly being done by the government.
• The economy cannot rely solely on government investment as the government may have to cut down on borrowing in the future to reduce its debt.It will adversely affect its investment in the economy.
• In 2024 the growth rate in the developed countries of the US and Western Europe is expected to decline, which can adversely affect trade and investment.  
• The World Bank has also warned that India is squandering its demographic dividend of growth. It is not creating jobs nearly fast enough to provide employment for its growing population. 

What is a Demographic Dividend

Demographic dividend refers to the potential of economic growth in a country due to a declining fertility rate and an increasing number of working people in its population. It is expected to boost economic growth as there are less number of dependent people (non working population like children and old age people).

India is the most populous country in the world. According to the UNFPA (United Nations Population Fund) State of World Population Report 2023, the working population of India, which includes the 15-64 age group, comprises 68% of the total population.

The UNFPA report also highlights the fact that  India has one of the youngest population in the world. In 2020 the median age of India is 28 as compared to 37 in China and the  US. The median age in Western Europe is 45, and in Japan, 49. 

In India, the working age population is 15 to 59 years.

However, to reap the benefits of a young working population, the government needs to formulate a policy that can provide opportunities for young people to contribute to economic growth.

World Bank 

President: Ajay Banga  

Headquarters: Washington D.C, United States of America

Member:189.