NEW DELHI, September 3, 2024 — The Indian economy continues to grow at a healthy pace despite challenging global conditions, according to the World Bank’s latest India Development Update: India’s Trade Opportunities in a Changing Global Context. However, to reach its $1 trillion merchandise exports goal by 2030, India needs to diversify its export basket and leverage global value chains.
The India Development Update (IDU) observes that India remained the fastest-growing major economy and grew at a rapid clip of 8.2 percent in FY23/24. Growth was boosted by public infrastructure investment and an upswing in household investments in real estate. On the supply side, it was supported by a buoyant manufacturing sector, which grew by 9.9 percent, and resilient services activity, which compensated for underperformance in agriculture. Reflecting these trends, urban unemployment has improved gradually since the pandemic, especially for female workers. Female urban unemployment fell to 8.5 percent in early FY24/25, although urban youth unemployment remained elevated at 17 percent. With a narrowing of the current account deficit and strong foreign portfolio investment inflows, foreign exchange reserves reached an all-time high of $670.1 billion in early August.
Amid challenging external conditions, the World Bank expects India’s medium-term outlook to remain positive. Growth is forecasted to reach 7 percent in FY24/25 and remain strong through FY26/27. With robust revenue growth and further fiscal consolidation, the debt-to-GDP ratio is projected to decline from 83.9 percent in FY23/24 to 82 percent by FY26/27.
Ajay Banga 14th President of the World Bank Group
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The IDU also highlights the critical role of trade for boosting growth amid increased protectionism globally post-pandemic reconfiguration of global value chains has created opportunities for India. The report emphasizes that India has boosted its competitiveness through initiatives like the National Logistics Policy and digital initiatives reducing trade costs but notes that tariff and non-tariff barriers could limit potential trade-focused investments.
“India’s robust growth prospects along with declining inflation will help reduce extreme poverty,” said Auguste Tano Kouame, World Bank's Country Director in India. “India can boost its growth further by harnessing its global trade potential."
The IDU recommends a three-pronged approach towards achieving the $1 trillion merchandise export target: reducing trade costs further, lowering trade barriers, and deepening trade integration.
“With rising costs of production and declining productivity," said Nora Dihel and Ran Li, Senior Economists co-authors of the report," India's share in global apparel exports has declined from 4 percent in 2018 to 3 percent in 2022."
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