The World Bank has revised its growth forecast for India’s economy to 7% for the fiscal year 2025 (FY25), up from an earlier estimate of 6.6%. This upward adjustment, announced on Tuesday, reflects expectations of stronger economic performance driven by robust private consumption and investment. The World Bank’s revised outlook aligns with similar optimism from the International Monetary Fund (IMF), which also increased its projection for India’s FY25 GDP growth to 7% in July.
According to the World Bank’s latest India Development Update (IDU), while India’s economy remains resilient, achieving the ambitious target of $1 trillion in merchandise exports by 2030 will require strategic diversification and deeper integration into global value chains. “India’s robust growth prospects, along with declining inflation, will contribute to reducing extreme poverty,” said Auguste Tano Kouame, the World Bank’s Country Director in India. Kouame emphasized the need for India to harness its global trade potential by expanding into sectors beyond its traditional strengths in IT, business services, and pharmaceuticals, highlighting opportunities in textiles, apparel, footwear, electronics, and green technology products.
The report also pointed to job creation as a critical challenge to sustaining India’s economic growth. Despite the positive outlook, the urban unemployment rate remains high, averaging 17%, according to the World Bank. However, the institution expects a gradual increase in private investment and a recovery in consumption, which are anticipated to support further economic expansion.
India’s external economic indicators also show improvement. The current account deficit has narrowed, and foreign exchange reserves have reached an unprecedented high of $670.1 billion in early August, providing over 11 months of import cover. These trends underscore India’s growing economic stability, even as it navigates a complex global environment.
Looking ahead, the World Bank projects that India’s medium-term economic outlook will remain positive, with growth expected to sustain at 7% in FY25 and beyond. Fiscal consolidation efforts and robust revenue growth are anticipated to reduce the debt-to-GDP ratio from 83.9% in FY24 to 82% by FY27. The current account deficit is forecasted to remain between 1% and 1.6% of GDP through FY27.
The IDU recommends a three-pronged strategy to achieve the $1 trillion merchandise export target by 2030, focusing on reducing trade costs, lowering trade barriers, and deepening trade integration. In contrast to these positive forecasts, data from the National Statistical Office (NSO) highlighted a slight slowdown in GDP growth during the April-June quarter, which decelerated to 6.7% due to reduced government spending. This slowdown follows a strong expansion in the previous fiscal year, where GDP grew by 8.2%, driven by a better-than-expected growth rate of 7.8% in the final quarter of FY24.
