India may grow 6.7% on average from FY25-FY27: World Bank

The World Bank back in April 2 raised its GDP growth projection for India by 20 basis points to 6.6 percent in FY25.

The World Bank on June 11 retained its GDP growth projection for India at 6.6 percent in FY25.

Back in April, the World Bank had raised its GDP growth projection for India by 20 basis points to 6.6 percent for the ongoing financial year.

The global agency said that India will remain the fastest-growing of the world’s largest economies, although its pace of expansion is expected to moderate. After a high growth rate in 2023-24, steady growth of 6.7 percent per year, on average, is projected for the three fiscal years beginning in 2024-25, according it its Global Economic Prospects for June 2024.

World Bank see India's GDP growth at 6.7 percent in FY26 and 6.8 percent in FY27.

India's GDP growth surpassed all expectations and stood at 7.8 percent in the January-March quarter, though slower versus 8.4 percent in the third quarter. The full-year 2023-24 GDP growth has been revised upwards to 8.2 percent from the second advance estimate of 7.6 percent, data released by the Ministry of Statistics and Programme Implementation on May 31 showed.

The country's central bank expects India's to grow at 7.2 percent in FY25.

Global GDP growth is now seen at 2.6 percent for 2024-25, 20 basis points higher than the estimate back in January. For both FY26 and FY27, it is expected to be 2.7 percent.

"Global growth is projected to stabilise at 2.6 percent this year, holding steady for the first time in three years despite flaring geopolitical tensions and high interest rates. It is then expected to edge up to 2.7 percent in 2025-26 amid modest growth in trade and investment," the World Bank said in its June 2024 prospectus.

When it comes to the South Asia (SAR) region, GDP growth is projected to slow from 6.6 percent in 2023 to 6.2 percent in 2024, mainly due to a moderation of growth in India from a high base in recent years.

But, with steady growth in India, regional growth is expected to stay at 6.2 percent in 2025-26. Among the region’s other economies, growth is expected to remain robust in Bangladesh, though at a slower rate than in the past several years, and to strengthen in Pakistan and Sri Lanka. However, risks to the outlook remain tilted to the downside, the world bank said.

These downside risks include, disruptions in commodity markets caused by the escalation of armed conflicts, possible abrupt fiscal consolidations, financial instability stemming from the large exposure of banks to sovereign borrowers, more frequent or severe extreme weather events, and slower-than-expected growth in China and Europe.

"Conversely, stronger-than-projected activity in the United States and faster-than-expected global disinflation are upside risks to the forecast," the global agency added.

Moving beyond GDP growth, the World Bank sees global inflation moderating, but at a slower clip than previously assumed, averaging 3.5 percent this year. And, given continued inflationary pressures, central banks in both advanced economies and emerging market and developing economies (EMDEs) will likely remain cautious in easing monetary policy. Therefore, average benchmark policy interest rates over the next few years are expected to remain about double the 2000-19 average.

The agency expects global risks to remain tilted to the downside despite the possibility of some upside surprises.

"Escalating geopolitical tensions could lead to volatile commodity prices, while further trade fragmentation risks additional disruptions to trade networks. Already, trade policy uncertainty has
reached exceptionally high levels compared to other years that have featured major elections around the world since 2000," according to the World Bank.

The persistence of inflation could lead to delays in monetary easing. A higher-for-longer path for interest rates would dampen global activity.

However, on the upside, global inflation could moderate more quickly than assumed in the baseline, enabling faster monetary policy easing. In addition, growth in the United States could be stronger than
expected.

The agency now sees the US economy growing at 2.5 percent in 2024, the same as in 2023 but sharply higher than the previous estimate of 1.6 percent.