The World Bank has reaffirmed its earlier projection of India’s Gross Domestic Product (GDP) growth for the financial year 2023-24, maintaining it at 6.3 percent. Despite a complex global landscape, the country has demonstrated remarkable resilience.
In its April report, the World Bank had revised down India’s growth forecast for 2023-24 from 6.6 percent to 6.3 percent. However, according to the latest India Development Update (IDU) released on Tuesday, the international financial institution’s flagship half-yearly report on the Indian economy, India emerged as one of the fastest-growing major economies in 2022-23, achieving a growth rate of 7.2 percent.
The World Bank attributed this resilience to sturdy domestic demand, substantial public infrastructure investments, and a bolstered financial sector. India’s growth rate was second only to another G20 nation, and nearly twice the average for emerging market economies.
Bank credit in India witnessed a notable surge of 15.8 percent in the first quarter of this fiscal year, in comparison to the 13.3 percent recorded in the same period of the preceding year. The service sector is anticipated to maintain its vigor with an expected growth rate of 7.4 percent, while investment growth is projected to remain robust at 8.9 percent.
Auguste Tano Kouame, the Country Director of the World Bank in India, cautioned about persistent short-term challenges due to an adverse global environment. He emphasized the importance of leveraging public spending to attract more private investments, thereby creating a more conducive environment for India to seize global opportunities and achieve higher growth in the future.
The World Bank anticipates ongoing and escalating global headwinds driven by elevated global interest rates, geopolitical tensions, and sluggish worldwide demand. Consequently, global economic growth is anticipated to decelerate over the medium term.
Regarding adverse weather conditions in India, which contributed to a recent spike in inflation, the World Bank stated in the report that inflation is projected to gradually subside as food prices stabilize and government interventions augment the supply of key commodities. Dhruv Sharma, Senior Economist at the World Bank and lead author of the report, suggested that while a temporary constraint on consumption may be observed due to the inflation spike, conditions overall will remain favorable for private investment. The volume of foreign direct investment is also anticipated to rise in India as the global value chain undergoes rebalancing.
Headline inflation in India experienced an ascent to 7.8 percent in July, attributed to surges in prices of staples like wheat and rice. However, it later receded to 6.8 percent in August.
Furthermore, the World Bank foresees continued fiscal consolidation in 2023-24, with the central government’s fiscal deficit expected to diminish from 6.4 percent to 5.9 percent of GDP. Public debt is projected to stabilize at 83 percent of GDP. On the external front, the current account deficit is predicted to narrow to 1.4 percent of GDP, and it will be sufficiently financed by foreign investment flows, supported by ample foreign reserves.
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