India’s economy experienced growth of over 8% in the fiscal year that ended in March, exceeding the Modi government’s forecast of 7.6%. This strengthens India’s position as the world’s fastest growing major economy. For the final quarter of the fiscal year, GDP expanded by 7.8%, surpassing expectations. Despite expectations of economic activity moderating in the coming quarters, India is expected to remain a global outperformer. The national election is nearing its end, with results expected to be declared on June 4.
Prime Minister Narendra Modi is seeking a third term based on his economic record over the past decade, during which India saw significant growth and rose in global economic rankings. If Modi wins again, it is anticipated that any economic deceleration will be minor. India is projected to climb higher in the ranking of the world’s biggest economies, potentially reaching number three behind the US and China by 2027. The country is increasingly seen as an alternative to China for companies looking to diversify their supply chains.
While there is optimism surrounding India’s growth figures, economists highlight significant challenges facing the economy in the coming years. The new government will need to address the issue of creating millions of jobs for its largely impoverished population. Despite having a young demographic, the country struggles to leverage the economic benefits of its youthful population, with high rates of youth unemployment. Climate change also presents a major threat to the economy, as rising temperatures could impact productivity and economic growth.
The potential underperformance of Modi’s party in the polls could delay key land and labor reforms, hindering further economic progress. India’s vulnerability to extreme heat due to climate change poses a significant risk, with rising temperatures already impacting daily life and work conditions. Experts warn that the country could face significant losses in working hours due to heat stress by 2030, affecting various sectors including agriculture and construction. The implications of climate change on poverty alleviation, health, and economic growth are a growing concern for India’s future economic prospects.
