Global Economic Prospects and India's Growth
The World Bank's latest Global Economic Prospects (GEP) report highlights key growth forecasts for India and the global economy, emphasizing India's position as the fastest-growing major economy.
India's Economic Growth
- Growth Projections: India is projected to grow at a rate of 6.7% in both FY26 and FY27.
- Sectoral Insights:
- The services sector is expected to maintain robust growth.
- Manufacturing is likely to strengthen due to improvements in logistics infrastructure and tax reforms.
- Private Consumption: Predicted to increase due to a stronger labor market, expanding credit, and declining inflation, though urban consumption has been constrained by higher inflation and slower credit growth.
- Investment Growth: Supported by rising private investment, strong corporate balance sheets, and easing financing conditions.
Global Economic Outlook
- World Economic Growth: Projected to expand by 2.7% in 2025 and 2026, mirroring the pace of 2024 due to declining inflation and interest rates.
- South Asian Region: GDP growth is expected to reach 6.2% in 2025 and 2026, driven by India’s performance.
- Developing Economies:
- Account for 60% of global growth but face the weakest long-term growth outlook since 2000.
- Progress in catching up with advanced economies is expected to be slower.
Trends in Global Economic Integration
- Foreign Direct Investment (FDI): As a share of GDP, FDI flows to developing economies have halved compared to the early 2000s.
- Trade Restrictions: New global trade restrictions in 2024 are five times the 2010-19 average.
- Long-term Growth Trends: Overall global economic growth has decreased from 5.9% in the 2000s to 3.5% in the 2020s.
Key Observations
- Since 2014, developing economies, excluding China and India, have experienced lower per capita income growth compared to wealthy economies, widening the income gap.
- According to the World Bank, the next 25 years may present more challenges for developing economies compared to the past 25 years.
