India's economic growth robust despite global challenges: World Bank

India's growth was bolstered by a vibrant manufacturing sector, which expanded by 9.9 per cent. On the supply side, strong manufacturing activities were the primary engines of growth, supporting the overall economic expansion.

Urban unemployment has steadily improved since the pandemic, with a notable reduction in female unemployment. Female urban unemployment fell to 8.5 per cent in early FY25, though youth unemployment in urban areas remained elevated at 17 per cent, as per the World Bank.

The nation’s foreign exchange reserves reached a record high of $670.1 billion in early August, equivalent to over 11 months of import cover (based on FY24 imports), driven by a narrowing current account deficit and strong foreign portfolio investment inflows.

Despite a turbulent global economic landscape, the World Bank projects India’s medium-term outlook to remain positive. Growth is expected to reach 7 per cent in FY25 and continue at a strong pace through FY26 and FY27. Additionally, robust revenue growth and ongoing fiscal consolidation are expected to reduce India’s debt-to-GDP ratio from 83.9 per cent in FY24 to 82 per cent by FY27. The current account deficit is forecasted to remain stable at around 1-1.6 per cent of GDP over the same period.

The IDU underscores the critical role of trade in sustaining India's growth trajectory. The global trade environment has seen increasing protectionism, but India stands to benefit from the post-pandemic reconfiguration of global value chains. The report emphasises that India has improved its competitiveness through policies such as the National Logistics Policy and digital initiatives that are driving down trade costs.

However, the World Bank cautions that rising tariff and non-tariff barriers could hinder India’s potential for attracting trade-focused investments. To meet its ambitious target of $1 trillion in merchandise exports by 2030, India will need to diversify its export basket and fully leverage the opportunities presented by global value chains.

Fibre2Fashion News Desk (DP)