India’s Economic Strength and Global Impact: Outlook 2024

Amidst a challenging global landscape, India has emerged as an economic and geopolitical powerhouse in 2024. The country's economic growth trajectory has gained international attention, and several prestigious rating agencies and financial institutions have predicted a positive outlook.

Recent economic growth projections

India’s economic strength can be gauged from these forecasts:

• The International Monetary Fund (IMF) has raised India’s growth forecast to 7% for FY 2024-25 from 6.8% from its January 2024 prediction
• The United Nations has raised India’s 2024 growth forecast to 6.9% from 6.2%
• The Reserve Bank of India, in its June monetary policy, raised the real GDP forecast for FY 2024-25 to 7.2% from the earlier 7%

While the numbers may vary across institutions, they all convey the same message. India is well and truly on its path to economic prosperity.

Factors contributing to India’s economic growth

The underlying factors contributing to India’s economic growth are:

• Robust domestic demand

India's domestic demand has remained robust, leading to a significant increase in private consumption. During the third quarter of FY24, private consumption increased by 3.5% compared to the same period in the previous year, as per Deloitte . Also, there has been an increasing demand for luxury and premium goods as compared to basic ones.

• Spur in investment activities

Private investments have also witnessed robust activities growing by 10.6% year-over-year in Q3 of FY24 . This indicates a strong revival in the private capex cycle and the government's focus on infrastructure development, reflected in higher budget allocation for the sector over the years.

The Government of India's initiatives to liberalise foreign investments and boost exports are further expected to fuel investments and the economy.

• Growth of the manufacturing sector

Over the years, the Government of India has undertaken several initiatives, such as Make in India and PLI schemes, to boost the manufacturing sector. Its endeavour to push towards ‘Atmanirbhar Bharat’ has significantly boosted domestic manufacturing capabilities.

Global impact of India’s economic strength

The global impact of India's growing economy was evident last year when the country successfully assumed the presidency of G20. It showed the country's diplomatic finesse and economic clout. Successfully leading the G20 has enhanced India's influence in global affairs. It has positioned the country as a key player in shaping international policies and addressing global challenges.

India's economic growth has also helped it maintain a balance between two economic superpowers - the USA and Russia. When the USA imposed various economic sanctions on Moscow following the Ukraine War, India's economic prowess and political diplomacy ensured that it continued to trade with Russia, importing crude oil without facing major flak from the West.

Wrapping it up

With continued reforms, India is expected to become the third-largest economy in the world in the next three years and reach $7 trillion by 2030 . The government's policy push is expected to solve the challenges India is likely to face in this journey and promote inclusive growth.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. It is not produced by the desk of the Kotak Securities Research Team, nor is it a report published by the Kotak Securities Research Team. The information presented is compiled from several secondary sources available on the internet and may change over time. Investors should conduct their research and consult with financial professionals before making any investment decisions. Read the full disclaimer here.

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