India's Economic Growth Forecast by the World Bank

The World Bank has maintained its growth forecast for India at 6.7% for FY26, citing India as the fastest-growing major economy over the next two years.

Sectoral Growth Outlook

• Services Sector: Expected to experience sustained expansion. 
• Manufacturing Activity: Anticipated to strengthen due to government efforts to enhance logistics and improve the business environment through tax reforms. 

Global Economic Projection

• Global economy is projected to grow at 2.7% in 2025 and 2026, consistent with 2024 levels.
• Developing economies are expected to maintain a growth rate of about 4% over the next two years.

Challenges for Developing Economies

Indermit Gill, World Bank’s Chief Economist, highlighted the challenges ahead for developing economies:

• High debt, weak investment, and productivity growth.
• Rising costs of climate change.
• Need for domestic reforms to boost private investment, enhance trade relations, and optimize use of capital, talent, and energy.

India's Economic Indicators

• Private Consumption Growth: Expected to be fueled by a robust labor market, expanding credit, and declining inflation.
• Government Consumption Growth: May remain limited.
• Investment Growth: Projected to be steady with rising private investments.

Growth and Economic Challenges

India’s growth is projected to slow to 6.5% in 2024-25 from 8.2% in 2023-24 due to weaker investment and manufacturing growth. However, services and agriculture sectors show resilience.

Fiscal Policies in South Asia

• Fiscal policies are expected to be tight across South Asian countries.
• In India, fiscal deficits are likely to shrink due to increasing tax revenues.

Risks and Challenges in the South Asian Region

• Policy Uncertainty: Adverse trade policy shifts in major economies pose risks.
• Protectionist Measures: Intensification could affect exports and growth.
• Commodity Prices: Higher prices could harm growth, given the region's dependence on imports.
• Other Risks: Social unrest, tighter monetary policies, climate change disasters, and weaker growth in major economies.

Importance of Infrastructure Outlays in the Union Budget

Understanding the impact of infrastructure investments in the Union Budget necessitates grasping three key public expenditure principles:

1. Economic Impact of Infrastructure Spending

• According to government data, every Rs 1 spent on infrastructure contributes Rs 3 to the GDP.
• Conversely, Rs 1 spent on direct benefit transfers (DBT) adds only 90 paise to GDP.
• This highlights the significance of focusing on infrastructure capital expenditure to stimulate economic growth.

2. Gross Capital Formation in Infrastructure (GCFI)

• Mainstream political consensus suggests that India should aim for a GCFI of at least 7% of GDP.

3. Complementary Contributions

• Union Budget outlays for infrastructure are generally supplemented by contributions from states, private capital, and extra budgetary resources, including public sector undertakings.

The table provided quantifies the necessary outlays for India through 2029-30, predicting a Rs 13 trillion allocation for infrastructure in the 2025-26 Budget, targeting an overall spend of Rs 26 trillion to meet the 7% GDP objective.

Current Economic Concerns

• The RBI’s Systemic Risk Survey indicates low expectations for private capital expenditure revival due to geopolitical tensions, commodity price risks, and other factors.
• GDP estimates for Q2 of FY25 cast doubt on economic growth stability, with reduced government capital expenditure cited as a contributing factor.
• CMIE data shows a 22.1% decline in new project commencements and notable reductions in project completions and capital expenditure, both in government and private sectors.

Future Strategies and Recommendations

• Government may consider an 18% increase in infrastructure allocations to Rs 13 trillion.
• For a more aggressive economic boost, a Rs 15 trillion allocation might be pursued, potentially relaxing the fiscal deficit target by 0.5% for asset creation and economic revival.
• Additional funding could enhance social infrastructure sectors like health and education.

The content reflects the personal views of the author, an infrastructure sector expert and chairman of the CII’s National Council on Infrastructure.

The India Meteorological Department (IMD): An Overview

The India Meteorological Department (IMD), established in 1875, has evolved significantly and symbolizes India's scientific advancement in weather forecasting. With its 150th anniversary, its role in predicting short- and long-term weather patterns and providing early warnings for adverse events is crucial across various sectors.

Role and Impact of IMD

• Weather forecasting is vital in sectors such as: 
  • Agriculture
  • Transport (road, rail, air)
  • Energy management from power plants
  • Tourism
• IMD provides critical data like: 
  • Wind speed and direction
  • Global horizontal irradiance forecasts
  • Historical temperature data for site selection, especially for solar and wind power plants

Achievements in Forecasting

• Accuracy in cyclone forecasts improved from 20% in the early 2000s to over 80% by 2020, particularly in predicting landfall points and timing.
• Probabilistic forecasts offer a lead time of four to five days for extreme weather events, enhancing disaster management.
• Technological advancements include: 
  • Automatic weather stations and rain gauge instrumentation
  • Doppler radars
  • Observatories

Vision for the Future

• The IMD Vision Document 2047 aims for a weather-ready and climate-smart nation, targeting goals like: 
  • 100% detection of severe weather at village and household levels
  • Zero error in forecasts up to three days
  • 90% accuracy for five-day forecasts
  • 80% accuracy for seven-day forecasts
  • 70% accuracy for ten-day forecasts
• Mission Mausam aims to enhance: 
  • Weather surveillance and modeling
  • Forecasting and weather modification
  • Infrastructure with a 2,000 crore budget over two years
  • Installation of Doppler weather-radars, radiometers, wind profilers, and cloud chambers

Challenges

• Deterministic forecasts for long-term monsoon patterns and extreme rainfall events.
• Climate change and urbanization present new vulnerabilities requiring innovative solutions.

Key Government Initiatives in January 2025

Prime Minister Narendra Modi has announced and launched several transformative initiatives, demonstrating a vision for a progressive and self-reliant India. These initiatives span across various sectors, setting a dynamic tone for the year 2025.

SVAMITVA Scheme

• Distribution of over 6.5 million property cards to property owners in 50,000 villages.
• Aim: To provide ownership rights and enhance rural infrastructure.

8th Pay Commission and Space Initiatives

• Approval for the establishment of the 8th Pay Commission.
• ISRO's success with the Space Docking Experiment (SpaDeX).
• Approval for a third launch pad at Sriharikota with an investment of Rs 3,984 crore.

Infrastructure and Welfare Programs

• Extension of a special package for Di-Ammonium Phosphate (DAP) to keep fertiliser prices affordable.
• Distribution of newly constructed flats under the In-Situ Slum Rehabilitation Project in Delhi.
• Foundation laying for educational projects worth over Rs 600 crore.

Rural Development and Economic Initiatives

• Grameen Bharat Mahotsav to promote GI-certified village products.
• Meeting with global tech leaders to foster indigenous innovation, including a $3 billion AI investment by Microsoft.
• Infrastructure advancements including the Namo Bharat Train Corridor and rail projects in several states.

Healthcare and Science Projects

• Launch of the Genome India Project to map genetic diversity.

Youth and Cultural Engagement

• Participation in the Viksit Bharat Young Leaders Dialogue.
• Addressed the Pravasi Bharatiya Divas convention.

Defence and Security Enhancements

• Inauguration of the Sonamarg Tunnel for improved connectivity and national security.
• Commissioning of advanced naval combatants to bolster India's maritime strength.

Prime Minister Modi emphasized the role of these initiatives in shaping a developed India and highlighted the importance of each citizen in building a prosperous future.

Macroeconomic Policymaking Challenges in India (2025)

Macroeconomic policymaking in India faces significant challenges due to external economic pressures and internal growth dynamics. The complex global and domestic economic landscape requires India to navigate carefully to sustain growth and stability.

External Economic Pressures

• American Exceptionalism:
  • Resilient growth in the US has tightened global financial conditions.
  • US Federal Reserve's reduced rate cuts expectations have led to increased bond yields and a strong dollar.
  • These changes put pressure on emerging-market currencies, including the rupee.
• Trump 2.0 Risks:
  • US tariffs increase global uncertainties, depressing capex and growth.
  • Potential redirection of Chinese excess capacity to countries like India.
  • Trade wars could result in weaker global growth but a stronger US economy.

Domestic Growth Dynamics

• Slowing Growth Momentum:
  • Urban consumption has diminished as pandemic savings exhaust and lending tightens.
  • Rural consumption is rising but at a gradual pace.
  • Private investment is cautious, awaiting better demand visibility.

Policy Response and Strategy

Monetary Policy

• Interest Rate Strategy:
  • Avoid using interest rates solely to defend the rupee.
  • Focus on domestic growth and inflation dynamics.
  • Use FX reserves to manage exchange rate adjustments.
• Inflation Management:
  • Food prices show relief, aiding inflation control.
  • Core inflation remains moderate, indicating economic slack.

Fiscal Policy

• Debt and Deficit Management:
  • Public debt/GDP is rising due to slow GDP growth.
  • Gradual fiscal consolidation is essential to avoid pro-cyclicality.

Opportunities and Reforms

Structural Reforms

• Labour-Intensive Growth:
  • Focus on accelerating growth through structural reforms.
  • Enhance the economy's external attractiveness amid global trade shifts.

Strategic Positioning

• US-China Trade War:
  • Position India as an attractive alternative for global firms.
  • Utilize the current government's political capital to push for reforms.

Overall, India must balance domestic policy adjustments with global economic dynamics, seizing the opportunity for reforms and growth amidst external challenges.