Indian economy outperforming peers

United Nations: India is projected to grow at 6.2 per cent in 2024, supported by robust domestic demand and strong growth in the manufacturing and services sectors, the United Nations has said. The UN World Economic Situation and Prospects (WESP) 2024 report, launched here on Thursday, said that gross domestic product in South Asia is projected to increase by 5.2 per cent in 2024, driven by a robust expansion in India, which remains the fastest-growing large economy in the world.

“Growth in India is projected to reach 6.2 per cent in 2024, slightly lower than the 6.3 per cent estimate for 2023, amid robust domestic demand and strong growth in the manufacturing and services sectors,” the report said. India's GDP is projected to increase to 6.6 per cent in 2025. The report notes that economic growth in India is projected to remain “strong” at 6.2 per cent this year mainly supported by resilient private consumption and strong public investment.

While manufacturing and services sectors will continue to support the economy, erratic rainfall patterns will likely dampen agricultural output, it said. “Indian economy again outperformed its peers, not just this year but the last few years,” Chief of the Global Economic Division Monitoring Branch, Economic Analysis and Policy Division (UN DESA) Hamid Rashid told reporters.

He said that India's economic growth has consistently remained over six per cent and “we believe this will continue in 2024 and 2025 as well.” Rashid noted that although inflation was relatively high for India, it didn't have to raise rates as much and inflation has come down quite a bit. “That has allowed the government to sustain the fiscal support that it needed,” he said adding that we didn't see significant fiscal adjustments or fiscal retrenchment in India.

“Overall, domestic consumption is growing, household spending has grown, employment situation has improved quite a bit. So we are very optimistic about India's growth outlook in the near term,” he said. In response to a question on factors holding back India's economic growth, Director of the Economic Analysis and Policy Division Shantanu Mukherjee cited India's GDP growth rates of four years from 2022-2025 and said: "I'm not sure that 7.7%, 6.3%, 6.2% and 6.6% is exactly holding something back. In a kind of abstract sense, one would run the risk of overheating an economy if you grew at much faster rates at the size and complexity of India.”

Mukherjee noted that the Indian government has recently modified its tax collection systems and "those have also certainly helped and given a more stable playing field for businesses and other initiatives to progress.” Highlighting risks facing the economy, he said some of those risks are more global in nature.