Context: The World Bank has revised India’s economic growth forecast for 2024 upwards to 7%, citing improvements in private consumption and rural incomes.
Relevance: General Studies Paper III – Economic Development,
Mains Question: Discuss the factors leading to the upward revision of India’s growth forecast by international agencies, with particular emphasis on the challenges faced by India’s export sector. Suggest measures to enhance India’s global competitiveness. (15M, 250 words)
- World Bank’s Growth Forecast:
- The World Bank has revised India’s growth estimate to 7% for 2024, up from the earlier expectation of 6.6%.
- The revised forecast aligns with other assessments, including those of the RBI (7.2%) and IMF (7%).
- Contributing Factors:
- Private Consumption: Expected to rise due to rural income recovery, especially after a strong monsoon following last year’s El Niño.
- Investment Growth: Some deceleration is expected due to slower government capital expenditure growth.
- Projections for 2025-2027:
- The World Bank expects an average growth rate of 6.7% during this period, slightly above IMF’s estimate of 6.5%.
- Challenges on the Export Front:
- Missed Opportunities in Low-Skill Manufacturing: Countries like Bangladesh and Vietnam are benefiting from China’s reduced manufacturing output, while India has not been able to take full advantage.
- Tariff and Non-Tariff Barriers: High tariffs and non-tariff measures have restricted India’s export potential, particularly in industries like textiles, apparel, leather, and electronics.
- Slow Employment Growth: The stagnation in employment levels is a key concern linked to weak export performance.
- Global Competitiveness:
- Rising Competition: India faces stiff competition from countries benefiting from China’s reduced market share in manufacturing.
- Trade Agreements and Value Chains: There is a need for India to integrate better with global trade agreements and value chains to expand its export base.
- Policy Responses:
- Trade Policy Adjustments: The Indian government has already reduced tariffs in recent budgets, but further reductions and reversal of non-tariff barriers are necessary.
- Export Strategy: Diversification and improvement of global trade partnerships can help India overcome the current export challenges.
- Focus on High-Value Manufacturing: India must focus on improving efficiency in sectors like textiles, footwear, and electronics.
Conclusion: While the World Bank’s upward revision of India’s growth forecast is a positive indicator of economic recovery, challenges in the export sector remain significant. India must focus on reducing trade barriers, increasing competitiveness, and strengthening its position in global value chains to ensure sustainable growth. Addressing these issues will be essential for India to fully capitalize on its growth potential in the coming years.
