India factor at work as World Bank raises South Asia growth forecast to 6.4% amid crisis in Pak, Lanka

Despite serious economic crises in Pakistan, Sri Lanka and the Maldives with Bangladesh also struggling, the World Bank has raised its growth forecast for South Asia to 6.4 per cent in 2024. Earlier, the World Bank had predicted South Asia’s growth rate at 6 per cent for the year.

The World Bank cited the strength of domestic demand in India and quicker recoveries in crisis-hit countries such as Sri Lanka and Pakistan as the reason for its upward revision of the region’s growth forecast.

India’s economic growth forecast for the current fiscal year, ending in March 2025, was revised to 7 per cent year-on-year. In April, the World Bank had pegged India’s growth forecast at 6.6 per cent. It has cited a rebound in agricultural output and increased private consumption for its revised growth estimate.

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On Wednesday, India’s central bank-the Reserve Bank of India-kept its GDP growth forecast at 7.2 per cent for the current fiscal year and shifted its policy stance to neutral.

“You have an emerging class of consumers in India that’s driving the economy forward, you have recoveries from crises in Sri Lanka and in Pakistan, you also have a tourism-led recovery in Nepal and Bhutan,” Martin Raiser, World Bank Vice President for South Asia, told Reuters.

The upward revision confirms South Asia as the fastest growing emerging economy region monitored by the World Bank. The Washington-based lender projects South Asia will see robust 6.2 per cent growth annually for the following two years.

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Raiser said there was “significant upside potential” to growth with greater integration of South Asian countries into the global economy, but countries needed to stick with economic reform programmes to sustain momentum.

Amid crises and recoveries in Pakistan and Sri Lanka

The World Bank projected Pakistan’s economy would grow by 2.8 per cent in the current fiscal year, which started in July. Earlier, Pakistan was projected to grow at 2.3 per cent. The upward revision comes on the back of a recovery in manufacturing and easing monetary policy.

Similarly, Sri Lanka also saw the biggest upward revision. It is now expected to grow at 4.4 per cent this year and 3.5 per cent in 2025. The island nation is clawing its way out of a sovereign debt default and its worst economic crisis in decades.

The World Bank also raised Nepal’s growth forecast to 5.1 per cent from 4.6 per cent for the 2024/25 fiscal year beginning mid-July, and Bhutan’s to 7.2 per cent from 5.7 per cent.

Concerns about Bangladesh

The World Bank, however, downgraded Bangladesh’s growth forecast to 4 per cent from 5.7 per cent estimated earlier for the fiscal year 2024/25-spanning from July to June. The downward revision reflects a slowdown in garment exports amid recent social unrest.

The global lender recommended the region should boost women’s labour force participation-currently the lowest globally at 32 per cent. Raising employment among women to levels comparable to those among men could raise output by as much as one-half in the long term, the report said.

“Bringing more women into the labour force could add significantly to the production potential,” said Raiser.

(With agency inputs)