India will remain the fastest growing country in 2024

According to the central bank's DSGE model, retail inflation is expected to decline to 4.8% in fiscal 2024-25 from 4.9% for the current fiscal. In line with the policy of continuing to actively disinflation, the RBI has kept the short-term interest rate or repo rate unchanged at 6.5% since February

Keeping the momentum going

  • The Indian economy grew by 7.7% in the first half of the year
  • Growth momentum is expected to continue in the December quarter
  • OECD forecasts India to grow 6.3% in 2023
  • Ahead of China and Brazil with 5.2% and 3% respectively
  • Forecast of 6.1% for India, 4.7% for China in 2024

New Delhi: India has firmly withstood global headwinds in 2023 and is expected to remain the world's fastest-growing major economy due to growing demand, moderate inflation, stable interest rate regime and robust foreign exchange reserves. Despite widespread pessimism among developed countries and deteriorating geopolitical situation, India recorded gross domestic product (GDP) growth of 6.1 per cent in the March quarter. Growth rose to 7.8 per cent in the June quarter and was 7.6 per cent in the September quarter. In the first six months of this financial year, growth was 7.7 percent. Growth momentum is expected to continue in the December quarter, making India the world's fastest-growing major economy, well ahead of China.

According to the latest conservative growth forecasts from the Organization for Economic Co-operation and Development (OECD), India will record growth of 6.3 percent in 2023, ahead of China and Brazil at 5.2 percent and 3 percent, respectively. For 2024, the OECD expects growth in India of 6.1 percent and in China of 4.7 percent. On the other hand, major economies, including the US, UK and Japan, are likely to see either a slowdown or a very nominal increase in economic growth rates next year. From a global perspective, India's economic performance in 2023 looks even better. According to the International Monetary Fund (IMF) World Economic Outlook, global growth is expected to slow from 3.5 percent in 2022 to three percent in 2023 and further to 2.9 percent in 2024.

Reserve Bank of India (RBI) Monetary Policy Committee (MPC) member Ashima Goyal said India's growth has proven highly resilient despite many external shocks. This is due to increasing economic diversity and the role of policies in cushioning shocks.” She said that equipping people with better skills and resources “will help India grow well in 2024 and beyond.”

Dharmakirti Joshi, chief economist at ratings agency Crisil, said geopolitical developments would once again test the resilience of India's domestic demand next year. “We expect GDP to grow by 6.4 percent in the coming fiscal year, slightly lower than the current one. The lagged impact of interest rate hikes and the global economic slowdown will be the biggest drags,” he noted.

A recent RBI article on the economic situation said: “Despite significant global headwinds, the Indian economy remained the fastest growing major economy in 2023. The outlook is characterized by cautious optimism as consumer confidence remains positive and perceptions of current income have changed in the RBI's latest household survey in November 2023.”

The RBI's dynamic Stochastic General Equilibrium (DSGE) model – which is based on microeconomic fundamentals and rational expectations that characterize the decisions of actors such as the representative consumer, the producer and the central bank – predicts a growth rate of 6 percent in the financial sector in 2024- 25. “After a few difficult years, the economic environment is becoming friendlier, inflation is trending downwards and growth remains robust.