As India’s gross domestic product (GDP) expanded at a robust pace of 7.6 per cent in Q2FY24, the Bank of Baroda in a recent report has said that the country is on track to be the fastest-growing economy in the world amid the geopolitical crisis.
While the International Monetary Fund (IMF) expects India’s GDP growth at 6.3 per cent, there is likely to be an upward bias to this number in subsequent updates. Amongst major economies, China is expected to grow by five per cent; however, given the recent headwinds, its growth path will not be easy.
Notably, the United States (US) economy while showing significant and unexpected traction, is expected to grow at a below-trend pace of 2.1 per cent.
It stated that the high-frequency indicators such as core sector output, auto sales, air passenger traffic, PMIs, credit growth etc., indicate a continued strength in the economy.
"Apart from this, festive demand and buoyant investment activity will also play a part in boosting growth. Overall, we expect FY24 GDP in the range of 6.6 to 6.7 per cent," it added.
The report mentioned that India has outperformed all major countries in terms of growth in real GDP in the September 2023 quarter. "It has done remarkably well when compared with its developed counterparts," it stated.
Also, the growth in the Eurozone continues to languish, led by a sharp and protracted slowdown in Germany. Amongst developed countries, the US has performed the best, even so at 2.8 per cent, it is still much below India.
Interestingly, emerging economies (EMs) have done much better than developed economies and the trend is likely to continue, the report estimated. While the average growth differential between India and advanced economies is about seven per cent, for EMs it is much lower at about four per cent.
"Growth in some EMs such as Indonesia, Vietnam, Turkey and the Philippines has been noteworthy, even though it continues to trail India," according to the report.
China, which was once touted as the engine of global growth, continues to grapple with the aftereffects of the long-drawn Covid-19 pandemic and property sector crisis. It registered a subdued growth of just 4.9 per cent.
The BoB report revealed that there are country-specific factors which are shaping the growth trajectory in each of these countries.
"While all the countries were faced with the twin blow of the pandemic and the commodity price shock, the fiscal and monetary responses have been divergent as also the linkage with the global economy in terms of coupling, which in turn are defining the growth outcomes of these countries,"it added.