Weathering the aftermath of the Iran war-induced energy crisis, India is projected to sustain its position as the fastest-growing large economy in the Asia Pacific region, with a growth rate of 6.4% in the current fiscal year, according to ESCAP, the UN agency for the region. The report released by ESCAP stated that India’s real GDP growth had moderated from 7.4% in the previous fiscal year to 6.6% in the upcoming fiscal year.
The projections for the current financial year were made amid the Iran conflict, with effects from the closure of the Strait of Hormuz beginning to impact the economy. Despite challenges, India’s growth remains robust, supported by strong consumption, especially from the rural economy, along with goods and services tax rate cuts.
India’s growth momentum has been attributed to its productivity growth, with the services sector playing a key role in driving economic expansion. ESCAP’s director of Macroeconomic Policy and Financing highlighted India’s ability to sustain high growth levels due to underlying productivity growth and its large population, which provides absorptive capacity for labor into productive sectors.
India’s targeted fiscal support for vulnerable populations is seen as a crucial factor in navigating global challenges. The country’s capacity to provide fiscal support to those in need enhances their ability to cope with rising food prices and other economic pressures.
