Indian Economy in Global Perspectives

Dr. Mukul Chandra Bora

(Director, Dibrugarh University Institute of Engineering and Technology)

 The World Bank’s recent report, “Global Economic Prospects” (June 2024), indicates that the global economy is stabilizing after years of negative shocks and uncertainty. Global growth is projected to remain steady at 2.6% this year, despite geopolitical tensions and high interest rates, and to rise slightly to 2.7% in 2025–26 with modest trade and investment expansions. Global inflation is expected to moderate more slowly than previously anticipated, averaging 3.5% this year. Central banks in both advanced economies and emerging markets and developing economies (EMDEs) are likely to be cautious in easing policies, resulting in sustained higher interest rates compared to pre-pandemic levels.

Although there is some improvement, the overall outlook remains subdued. Global growth is expected to be nearly half a percentage point below its 2010–19 average, with slower expansion in economies that encompass over 80% of the global population. EMDE growth is projected to slow from 4.2% in 2023 to 4% in 2024. Prospects remain particularly bleak for vulnerable economies, with over half of fragile and conflict-affected countries expected to be poorer in 2024 than before the pandemic.

Domestic demand is projected to improve in many EMDEs this year, in line with a moderate cyclical recovery from the effects of high inflation, tight financial conditions, and anaemic industrial activity. Aggregate EMDE growth is nonetheless poised to decelerate slightly, mainly because of idiosyncratic factors in some large economies. Moreover, significant challenges persist in vulnerable economies—including low-income countries (LICs) and those facing elevated levels of conflict and violence—where growth prospects have deteriorated markedly since January.

India and Indonesia are two examples of robust performance. India’s economy has been buoyed by strong domestic demand, a surge in investment, and robust service activity. It is projected to grow an average of 6.7 percent per fiscal year from 2024 through 2026, Indonesia is expected to benefit from a growing middle class and generally prudent economic policies, expanding by an average of 5.1 percent over the next two years. Making South Asia the world’s fastest-growing region. Indonesia is expected to benefit from a growing middle class and generally prudent economic policies, expanding by an average of 5.1 percent over the next two years.

GDP per capita in EMDEs is forecast to grow at about 3% on average over 2024–26, well below the average in 2010–19. Excluding China, EMDE per capita GDP growth is forecast to be second quarter, as a strengthening of the U.S. dollar—prompted by geopolitical tensions and firm inflation data in the United States coincided with a bout of capital outflows. Although market perceptions of sovereign credit risk have generally eased this year, EMDE borrowing costs continue to be high, and marked divergences persist. Indeed, credit ratings and debt sustainability analyses indicate that about 40 percent of EMDEs remain acutely vulnerable to debt-related stress.

Following two years of sharp fiscal consolidation at the global level, fiscal policy became generally supportive of growth in 2023, especially in advanced economies. Going forward, fiscal consolidation is projected to resume, exerting a material drag on near-term growth in advanced economies and a modest headwind in EMDEs. This reflects government efforts to rebuild fiscal space, which has been eroded by the run-up in debt since the onset of the pandemic and the sharp increases in borrowing costs.

Against this backdrop, global growth is expected to remain subdued at 2.6 percent in 2024—unchanged from the previous year—reflecting tepid investment growth amid broadly restrictive monetary policies and moderating consumption growth, in part because of receding savings buffers and diminishing fiscal support. Growth is projected to edge up to an average of 2.7 percent in 2025–26, as trade growth strengthens and broad but measured monetary policy easing supports activity in both advanced economies and EMDEs.

Across the forecast horizon, global growth remains lacklustre by recent historical standards, at about 0.4 percentage points below the 2010–19 average. In 2024–25, growth is set to underperform its average pace in the 2010s in nearly 60 percent of economies, representing more than 80 percent of global output and population. The subdued outlook—despite the anticipated moderation of various cyclical headwinds—underscores a secular deceleration of potential growth in many large economies. Relative to pre-pandemic norms, growth has weakened, notably in countries that experienced high rates of inflation, averaging 2.5 percent over 2024–26.

It is worth mentioning that the Organisation for Economic Cooperation and Development (OECD) has projected global growth at 3.1 percent in 2024 and 3.2 percent in 2025. But India is projected to grow at 6.6 percent, the fastest among major emerging markets. China is projected to grow at 4.9 percent and Brazil at 1.9 percent. India is one of the fastest growing economies in the world and is poised to continue on this path, with aspirations to reach high middle-income status by 2047, the centenary of Indian independence. It is also committed to ensuring that its continued growth path is equipped to deal with the challenges of climate change and is in line with its goal of achieving net-zero emissions by 2070.

The growth of the past two decades has also led to India making remarkable progress in reducing extreme poverty. In recent years, however, the pace of poverty reduction has slowed, especially during the COVID-19 pandemic, but has since moderated in 2021–22 in spite of certain challenges. It is also important to note that child malnutrition has remained high, with 35.5 percent of children under the age of 5 years being stunted, with the figure rising to 67 percent for children in the 6-59 month age group, and the government should put more emphasis on this issue so that future citizens can be healthy both physically and mentally.

According to the World Economic Forum, amidst a challenging global scenario, India has emerged as a significant economic and geopolitical power. Its actions in the coming year could lay the groundwork for the country to become the world’s third-largest economy within the next five years and a developed nation by 2047. This positions India as a model for inclusive, sustainable economic growth, digital development, and climate action.

For India, 2023 has been a landmark year, marked by its presidency of the G20, where it showcased its economic strength and diplomatic finesse. India’s emphasis on a rule-based international order, advocacy for collaborative problem-solving, and commitment to democratic values position it as a stabilising force in an increasingly complex global geopolitical landscape. Moreover, India has championed a new era of multilateralism, ensuring that developing countries have a significant voice in shaping the global narrative by integrating the concerns of the Global South into international discourse.

Notable achievements during India’s G20 presidency include the inclusion of the African Union in the G20, the launch of critical multistakeholder partnerships such as the Global Biofuel Alliance and the Global Initiative on Digital Health, progress on the United Nations Sustainable Development Goals (SDGs), the reform of multilateral development banks, and the expansion of digital public infrastructure. These accomplishments highlight India’s ability to build consensus and address global challenges collectively and effectively.

The World Economic Forum has actively supported India’s G20 agenda through its centres and initiatives, contributing to key thematic areas, including energy and health. Economically, India has been a key growth engine for the world, contributing 16% to global growth in 2023. The country’s growth rate of 7.2% in fiscal 2022-2023 was the second-highest among G20 countries, nearly double the average for emerging market economies that year.

India’s efforts to maintain stability and enact structural reforms have bolstered its economic resilience amidst global challenges. Investments in infrastructure and connectivity, such as the Bharatmala highway programme, the Sagarmala project for port-led development, and the Smart Cities Mission, are transforming the country’s landscape and driving economic advancement.

Over a decade ago, India began laying the foundation for a digital economy with the launch of its national identification programme, Aadhaar, which uses biometric IDs to establish proof of residence. Today, with a burgeoning tech industry, India has become a hub for innovation and technology services, boosting economic growth and positioning the country as a key player in shaping the future of the digital economy.

In response to escalating climate-related concerns, India has taken a leadership role in the global fight against climate change. Through initiatives like Mission LiFE (Lifestyle for Environment) and a strong push for green hydrogen, India has demonstrated a commitment to balancing economic advancement with ecological responsibility. India has also launched the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure and proposed a global grid for renewables. At COP28 in Dubai, Prime Minister Modi announced the Green Credit Initiative as a substitute for carbon credits.

Looking ahead, achieving India’s national and global ambitions will require strategic policymaking that balances economic growth, social development, and environmental sustainability. India’s demographic advantage will only be beneficial if coupled with labour market reforms and human development measures to skill one of the world’s largest workforces and address youth unemployment.

Continued broad-based policy initiatives and structural changes focused on inclusive growth, sustained domestic consumption demand, and rapid adoption of new and emerging technologies to enhance productivity will be critical. Additionally, India must continue engaging in multilateral forums to address global issues such as health crises, economic disparities, and geopolitical tensions.

The world is now witnessing a nation on the rise, with a booming economy and a commitment to inclusivity, sustainability, and international collaboration. India is poised to play a defining role in shaping the future of the global economy in 2024 and beyond. To achieve high-income status, termed @Vikshit Bharat, by 2047, India will require a climate-resilient growth process that delivers broad-based gains to the bottom half of the population. This will necessitate growth-oriented reforms alongside an expansion in good jobs to keep pace with the increasing number of labour market entrants. Additionally, addressing gaps in economic participation, particularly by bringing more women into the workforce, will be crucial. India is already making significant strides in green energy and green fuel. The country’s political will is on the right track, as evidenced by reports from global economic observatories such as the World Bank, the Organisation for Economic Cooperation and Development, and the World Economic Forum, which have acknowledged India’s efforts.