Indian economy to grow at 6.7% for next two financial years, says World Bank

India’s economic growth is projected to grow at a rate of 6.7% over the next two financial years, a World Bank report said on Thursday.

The report titled “Global Economic Prospects” said that the services sector is expected to enjoy sustained expansion. Manufacturing activities would strengthen, supported by government initiatives aimed at improving the business environment, it added.

“Investment growth is projected to be steady, with moderating public investment offset by rising private investment,” the international financial institution added.

The report examines global economic developments and prospects, with a special focus on emerging markets and developing economies. It is published twice a year, in January and June.

The global economy is projected to grow at 2.7% in both 2024-’25 and 2025-’26, the report said. This is the same rate as the financial year 2024.

The report, however, noted that this rate was less than the 3.1% growth rate recorded in the decade before the Covid-19 pandemic.

“The global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development – with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters,” the World Bank said.

As per the report, most low-income countries are unlikely to transition to middle-income status by mid-century without course corrections.

As a whole, growth in South Asia is expected to rise to 6.2% for the next two financial years, it said. Excluding India, growth in the region is estimated to have picked up to 3.9% in 2024, mostly driven by economic recoveries in Pakistan and Sri Lanka.

However, political uncertainty in Bangladesh is projected to drop the growth rates in the neighbouring country to 4.1% in 2024-’25, before picking up to 5.4% in 2025-’26, the report added.

The report came after the International Monetary Fund on January 10 said that the Indian economy is likely to be “a little weaker” in 2025 despite steady global growth.

India’s gross domestic product growth is also projected to sharply fall to a four-year low of 6.4% in the financial year 2024-’25, from 8.2% in 2023-’24, according to the first advance estimates released by the National Statistics Office on January 7.

The projection released by the Ministry of Statistics and Programme Implementation is slightly below the Reserve Bank of India’s projection of a growth rate of 6.6%. The decline in Gross Domestic Product growth could be due to a possible decline in manufacturing and investment growth.

The advance estimates give a broad picture of how the country’s economy may perform in the upcoming year and help the finance ministry decide on budgetary allocations.

Finance Minister Nirmala Sitharaman is expected to present the Union Budget on February 1.

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