Slower Investment & Tepid Manufacturing Dragged Economic Growth From 8.2 To 6.5 Pc: World Bank

(MENAFN- KNN India)
New Delhi, Jan 17 (KNN) The World bank has maintained its growth forecast for India at 6.7 percent for fiscal year 2025-26, confirming the nation’s position as the fastest-growing major Economy for the next two years.

The report notes a projected deceleration to 6.5 percent growth in 2024-25 from 8.2 percent in 2023-24, attributed to slower investment and manufacturing performance, though services remain steady and agricultural growth shows improvement.

This outlook is supported by anticipated expansions in both the services sector and manufacturing activity, with government initiatives focusing on logistics infrastructure improvements and business-friendly tax reforms.

The forecast comes amid broader global economic projections, with worldwide growth expected to maintain a 2.7 percent pace through 2025 and 2026, matching 2024’s performance.

Developing economies are projected to sustain growth rates of approximately 4 percent over the next two years, though World Bank Chief Economist Indermit Gill cautions about upcoming challenges.

Gill emphasises that developing economies face a more challenging environment than in previous decades, citing headwinds such as high debt, weak investment, declining productivity growth, and escalating climate change costs.

For India specifically, the World Bank anticipates private consumption growth will benefit from multiple favourable factors, including a strengthening labour market, expanding credit availability, and declining inflation.

While government consumption may remain modest, overall investment growth is expected to maintain stability, backed by robust corporate balance sheets and improving financing conditions.

The fiscal outlook for India appears disciplined, with deficits expected to continue narrowing, primarily due to increasing tax revenues.

This aligns with the general trend across South Asia, where fiscal policies are anticipated to remain predominantly restrictive over the forecast period.

However, the World Bank identifies several potential risks to the region’s growth prospects. These include heightened policy uncertainty, particularly regarding trade policies in major economies, potential protectionist measures in the United States and Europe, and vulnerability to commodity price fluctuations.

Additional concerns encompass possible social unrest, stricter monetary policies in response to persistent inflation, climate-related natural disasters, and slower-than-anticipated growth in major economies.

(KNN Bureau)

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