UNCTAD projects the Indian GDP to increase by 6.5% in 2024

According to a UN assessment, global corporations expanding their manufacturing operations into India to diversify their supply chains would boost Indian exports and contribute to the country’s 6.5% anticipated GDP growth in 2024.

India continued to be the fastest-growing major economy in the world, rising by 6.7% in 2023 and 6.5% in 2024, according to a research issued on Tuesday by UN Trade and Development (UNCTAD).

Strong public investment outlays and the thriving services sector, which profited from strong domestic demand for consumer services and strong international demand for the nation’s business services exports, were the main drivers of the expansion in 2023, according to the report. These factors are also anticipated to support India’s growth in 2024.

The research also said, with relation to China, how international corporations are increasingly focusing on India as a manufacturing base as they diversify their supply chains.

“In the outlook, an increasing trend of multinationals extending their manufacturing processes into India to diversify their supply chains will also have a positive impact on Indian exports, while moderating commodity prices will be beneficial to the country’s import bill,” stated the report.

Investment in South Asia, especially in India, is still robust, according to the international body’s flagship 2024 Financing for Sustainable Development Report: Financing for Development at a Crossroads, which was released last week.

It continued, ostensibly alluding to China, that India is reaping the benefits of increased attention from global corporations, who see the nation as a substitute industrial base in the framework of Western nations’ supply chain diversification initiatives.

According to the UNCTAD research, high public investment expenditures will balance out constrained public consumption spending, and the Reserve Bank of India is projected to maintain interest rates at current levels in the foreseeable future.

Other Southern Asian nations, meanwhile, continue to have more muted economic development.

It claimed that three countries in the region—Bangladesh, Pakistan, and Sri Lanka—are now enrolled in IMF programs, the conditions of which call for the implementation of strict fiscal austerity measures and monetary policies that mostly affect low-income families.

Global growth in 2024 is predicted to be 2.6%, which is a little less than the 2.7% growth in 2023.

According to the estimate, 2024 will be the third year in a straight that the world economy would develop more slowly than it did prior to the epidemic, when the average annual growth rate was 3.2% for the years 2015–2019.

The dangers that significantly threatened to impede global economic development in 2023 did not completely materialize, according to the UNCTAD research.

It added that as a result, the world economy grew by 2.7%, just 0.2 percentage points above the threshold of 2.5% that is frequently associated with a global recessionary phase. “Some economies, including large ones, such as China, India, Indonesia, the Russian Federation, the United States, among others, escaped the financial trouble that loomed earlier in the year,” the statement read.

Now, this advantageous dynamic is being wasted.

The focus of policy talks is still inflation, indicating optimism that the world’s economic problems would be resolved by the planned monetary easing.

According to the statement, “trade disruptions, climate change, low growth, underinvestment, and inequality are becoming increasingly serious pressing challenges.”

According to the research, China’s economy, which is expected to expand by 4.9% in 2024, has been dealing with a number of challenges, including low consumer spending, a volatile housing market, an underperforming labor market, and foreign concerns.

The UNCTAD report was released concurrently with the IMF’s most recent World Economic Outlook, which was made public on Tuesday. The IMF predicted that India’s growth would continue to be robust, rising to 6.8% in 2024 and 6.5% in 2025, due to both rising working-age population and persistently strong domestic demand.