From - https://x.com/zerodhamarkets/status/1844711469960843533
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Part 1 of 2
The latest economic update from the World Bank has big insights for South Asia, especially India. There’s a lot here that matters for us as investors—like upgraded growth forecasts, the impact of climate change, and the effects of geopolitical shifts.
Let’s break it down🧵
Let’s start with some good news: the World Bank has raised India’s growth outlook. They now expect the economy to grow 7% in FY 2024-25, up from an earlier estimate of 6.6%. While growth might slow slightly to 6.7% in FY 2025-26, India remains one of the fastest-growing economies in the world.
So, what’s behind this upgraded forecast?
Stronger Private Consumption: A rebound in agriculture and policies that are boosting employment have pushed consumer spending higher. Rural areas are seeing better incomes thanks to strong agricultural output, creating a positive ripple effect across the economy.
Agricultural Boost: A solid year of productivity in agriculture has lifted income levels, especially in rural areas. Better harvests mean more spending power, which in turn supports the broader economy.
Manufacturing and Services: Both these sectors are holding up well. India’s manufacturing sector is expanding faster than many other emerging economies, and the services sector has been growing for over 30 months.
Rising Portfolio Investments: Foreign portfolio investments (FPIs) have been on an upswing, nearly reaching pre-pandemic levels. They’ve grown for eight straight quarters, unlike in other South Asian countries where such investments have stalled. A major boost came from India’s inclusion of rupee-denominated government bonds in global bond indices, which has improved investor confidence.
Stable Inflation: Inflation in India is under control, staying within the Reserve Bank of India’s target range of 2-6%. This stability boosts consumer confidence, encouraging more spending, which supports overall economic growth.
Let’s shift gears to a more pressing concern: climate change. South Asia, and India in particular, is feeling the impact of extreme weather more than ever. Heatwaves and floods are becoming more frequent, and the effects are both humanitarian and economic.
Heatwaves on the Rise: Intense heat is becoming more common in India, and it’s hitting the poorest households hardest. Many don’t have access to cooling systems, making them especially vulnerable. This results in lower productivity and a greater risk to their overall well-being.
Small businesses are also feeling the heat. Many don’t have the funds to adapt to rising temperatures or deal with flood risks, making them less productive. This is especially true in industries like garment manufacturing, where manual labor is crucial.
This highlights a growing gap in how climate change affects different parts of society. Poorer households and smaller businesses bear the brunt, while larger companies often have the resources to adapt. There’s a real need for targeted measures like better social protections and stronger infrastructure to help those most at risk.
If these issues aren’t tackled, they could seriously slow down economic progress. Building climate resilience is becoming a critical part of the policy agenda—not just to protect the vulnerable but to ensure sustainable growth across the region.
Let’s talk about how South Asia is dealing with the shifting global economy. As the world divides into economic blocs, countries have to adjust to new challenges. For South Asia, this brings both risks and opportunities.
(End of Part 1)
