UN revises India's GDP growth forecast by 70 basis points to 6.9%

The United Nations (UN) has revised upwards India’s growth forecast for 2024 by 70 basis points to 6.9 per cent, from 6.2 per cent estimated in January this year, driven by robust public investment and resilient private consumption. 

“India’s economy is forecast to expand by 6.9 per cent in 2024, driven by strong public investment and resilient private consumption,” the World Economic Situation and Prospects report, released on Friday said. 

For 2025, however, it has kept its growth forecast unchanged at 6.6 per cent.

The international body has raised the global growth forecast for 2024 upward to 2.7 per cent from 2.4 per cent projected earlier and revised the 2025 numbers by 10 basis points to 2.8 per cent.

“The upward revisions reflect improved prospects in the US and several large developing economies, notably India and Brazil,” it said.

However, the near-term economic outlook is only cautiously optimistic as economic vulnerabilities remain, amid persistently high interest rates, continuing geopolitical tensions and increasing climate risks, the report added.

The report noted that the government remains committed to gradually reducing the fiscal deficit, while seeking to increase capital investment. The government has set a target to reduce the fiscal deficit to 5.1 per cent in FY25, from 5.8 per cent in FY24. 

On the consumer inflation front, the report said that inflation in India is projected to decelerate from 5.6 per cent in 2023 to 4.5 per cent in 2024, staying within the central bank’s 2 to 6 per cent medium-term target range.

Regarding the labour markets, the report said that amid subdued economic activity in several developing countries, employment prospects remain weak in the near term.

Though labour market indicators in India have improved amid robust growth and higher labour force participation, it said. 

The UN body also noted that surging demand for critical minerals presented new opportunities for developing economies but pointed to a need for innovation and policy and institutional reforms.

“While Brazil, Chile, India, Indonesia, and South Africa hold a significant share of critical mineral deposits, they contribute comparatively little to mining innovation. Avoiding a renewed “resource curse” and harnessing the potential of critical minerals in the developing countries will require significant policy and institutional reforms and reorientation,” the report said.

The latest revision in the growth forecast of the Indian economy by the UN body follows similar revisions made by other multilateral agencies on the back of strong performance in the previous year.

The IMF projected India to grow by 6.8 per cent in FY25, while the ADB raised India’s FY25 growth forecast to 7 per cent.

The report also highlighted headwinds for the Indian economy and noted that subdued external demand would continue to weigh on merchandise export growth, even though the pharmaceuticals and chemicals exports are expected to expand strongly.