“Growth is forecast to remain strong over the medium term, reaching 7% in FY25 and averaging 6.7% over FY26-FY27, from a high base in the previous years reflecting capex push over the past years-gradually crowding in private investment-and gradual recovery in private consumption,” it said.
Private investment is expected to pick up over the medium term.
Amid geopolitical uncertainties and relatively restrictive monetary policy, global economic activity experienced a deceleration in 2023 to 2.6% while India showed “extraordinary resilience against challenging external conditions” and grew at 8.2% in FY24, as the fastest-growing major economy in the world, according to the report.
Improvement in monsoon and private consumption have led to revising the India gross domestic product (GDP) forecast, said World Bank senior economist Ran Li.
This follows an upward revision in growth forecast for the Indian economy by International Monetary Fund (IMF) and Asian Development Bank (ADB) to 7% for FY25. The economic survey had pegged the country’s real gross domestic product (GDP) growth at 6.5-7% in 2024-25, while the Reserve Bank estimates a higher 7.2% growth for the current financial year.
Last week, Moody’s upgraded its economic growth forecast for India to 7.2% in 2024 and 6.6% in 2025, from earlier estimates of 6.8% and 6.4%, respectively.
The World Bank also projected India’s retail inflation to rise 4.5% in FY25, 4.1% in FY26 and 4% in FY27, aligning with RBI’s target. The current account deficit is anticipated to remain between 1% and 1.6% of GDP until FY27.
It highlighted that the urban labour market improved gradually since the peak of the pandemic although youth unemployment remained elevated at around 17%.