World Bank Increases India's Growth Forecast to 7% for FY25 Driven by Private Consumption

The World Bank has upgraded its economic growth forecast for India to 7% for the fiscal year ending in March 2025, an increase from the previous estimate of 6.6% made in April. This revision comes as a result of a rebound in agricultural output and a rise in private consumption, reflecting strong domestic demand.

In addition to India’s growth forecast, the World Bank raised its growth projection for South Asia to 6.4% in 2024, up from 6.0%, citing recoveries in countries such as Sri Lanka and Pakistan.

Martin Raiser, World Bank Vice President for South Asia, highlighted the emergence of a new class of consumers in India as a key factor driving economic growth. He mentioned that improvements in tourism and recovery efforts in neighboring countries like Nepal and Bhutan also contribute to the region's positive economic outlook.

The Reserve Bank of India (RBI) has maintained its Gross Domestic Product (GDP) growth forecast at 7.2% for FY25. The RBI also projected growth rates for individual quarters: 7% for Q2, 7.4% for both Q3 and Q4, and 7.3% for Q1 FY26.

Despite global uncertainties and rising food prices, the central bank has kept its inflation forecast for the fiscal year unchanged at 4.5%. The RBI indicated that the resilient domestic growth outlook, driven by private consumption and investment, allows for a focus on aligning inflation with its target.

In line with the World Bank's assessment, the International Monetary Fund (IMF) has also raised India’s GDP growth forecast to 7.0%, attributing this to improved prospects for private consumption, especially in rural areas.

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