Indian economy projected to grow 6.5 per cent in 2024: UNCTAD

Vegetable vendors on Ramwadi lane, near Bhuleshwar. File pic

India's economy is projected to grow by 6.5 per cent in 2024, according to a report by the UN which noted that multinationals extending their manufacturing processes into the country to diversify their supply chains will have a positive impact on Indian exports.

UN Trade and Development (UNCTAD) in its report released on Tuesday said that India grew by 6.7 per cent in 2023 and is expected to expand by 6.5 per cent in 2024, continuing to be the fastest-growing major economy in the world.

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"The expansion in 2023 was driven by strong public investment outlays as well as the vitality of the services sector which benefited from robust local demand for consumer services and firm external demand for the country's business services exports," the report said, adding that these factors are expected to continue to support growth in India in 2024.

The report also noted the increasing focus by multinationals on India as a manufacturing base as they diversify their supply chains, a reference to China.

"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," it said.

Last week, the flagship '2024 Financing for Sustainable Development Report: Financing for Development at a Crossroads' launched at the world body said that investment in South Asia, particularly in India, remains strong.

It added that India is benefiting from growing interest from multinationals, which see the country as an alternative manufacturing base in the context of developed economies' supply chain diversification strategies, making an apparent reference to China.

The UNCTAD report said the Reserve Bank of India is expected to keep interest rates constant in the near term, while restrained public consumption spending will be offset by strong public investment expenditures.

In other Southern Asian countries, however, economic growth remains more subdued. Three countries in the region " Bangladesh, Pakistan and Sri Lanka " are currently under IMF programmes, the conditionalities of which necessitate the application of tight monetary policies and fiscal austerity measures whose impacts are most severely felt by low-income households, it said.

Global growth is projected to be 2.6 per cent in 2024, slightly slower than the 2.7 per cent in 2023.

This makes 2024 the third consecutive year in which the global economy will grow slower than before the pandemic when the average rate for 2015"2019 was 3.2 per cent, the report said.

The UNCTAD report added that the risks that substantially threatened to slow down global economic growth in 2023 did not fully materialise.

"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," it said, adding that as a result, the world economy grew 2.7 per cent, just 0.2 percentage point more than the threshold of 2.5 per cent that is often associated with a global recessionary phase.

"This positive dynamic is now being squandered. Policy discussions continue to centre on inflation, conveying confidence that anticipated monetary easing will heal the world's economic woes. Meanwhile, the pressing challenges of trade disruptions, climate change, low growth, under-investment and inequalities are growing more serious," it said.

The report said that China's economy, projected to grow 4.9 per cent in 2024, has been facing some headwinds such as external uncertainties, a troublesome housing market, an under-performing labour market and subdued consumption.

The UNCTAD report comes even as the International Monetary Fund said in its latest edition of the World Economic Outlook released on Tuesday that growth in India is projected to remain strong at 6.8 per cent in 2024 and 6.5 per cent in 2025, with the robustness reflecting continuing strength in domestic demand and a rising working-age population.

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