Will India emerge as global economic powerhouse in 2024?

Against a backdrop of global economic volatility, coupled with food and oil supply shocks keeping inflation elevated, some may wonder whether India’s growth momentum will continue in 2024.

The country, which overtook China to become the world’s most populous nation in 2023 with more than 1.4 billion people, is set to benefit from its young demographic and rising middle class incomes, economists say.

“Heading into 2024, India continues to remain in a sweet spot when it comes to its growth,” says Bhavesh Shah, managing director and head of investment banking, Equirus, an investment bank based in Mumbai.

“The growth engine powered by government’s capital expenditure push and domestic consumption remains well oiled.”

Growth forecasts from major global financial institutions are bullish.

Goldman Sachs, in its latest global economic outlook for 2024, said out of the 13 large economies it tracked, India’s projected growth rate was the highest at 6.2 per cent, followed by China with a forecast of 4.8 per cent.

“Despite food and oil supply shocks keeping inflation elevated, [India’s] growth is forecast to remain stable and resilient,” according to the US investment bank.

Goldman Sachs Research’s India economists Santanu Sengupta and Arjun Varma “expect consumption growth to be driven by subsidies and transfer payments”, as the government has been spending money on schemes that benefit households including food and gas subsidies.

On December 18, the International Monetary Fund said it expected India’s growth “to remain strong, supported by macroeconomic and financial stability”, projecting that the country’s gross domestic product will expand by 6.3 per cent in the financial year between April 2024 and March 2025.

This comes as India enjoyed strong economic growth in 2023, despite global headwinds and volatile inflation.

The latest official data shows that the country’s economy expanded by a faster-than-expected 7.6 per cent on the year in the July to September quarter. Growth was increased by government spending and the manufacturing sector.

This has made the Indian economy a bright spot, as China’s growth stalls, and as western countries feel the heat from high-interest rates and increasing energy costs.