The World Bank has retained growth forecast for India at 6.9 per cent for FY23 and 6.6 per cent for FY24. This is despite the latest Global Economic Prospects report, released on Saturday, portraying a gloomy picture for entire world economy.

As projected in December, growth in current fiscal is projected to be lower 8.7 per cent in FY2021/22. Also, growth in FY24 is expected to further slow down to 6.6 per cent. Still the report said: “India is expected to be the fastest growing economy of the seven largest EMDEs (Emerging Markets and Developing Economies).” On Friday, the government said it estimates the economy to grow by 7 per cent in the current fiscal (FY23)

Fragile economic conditions

Talking about the world economy, the report said global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine. “The global economy is projected to grow by 1.7 per cent in 2023 and 2.7 per cent in 2024. The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95 per cent of advanced economies and nearly 70 per cent of emerging market and developing economies,” it said.

Further it mentioned that given fragile economic conditions, any new adverse development such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the Covid-19 pandemic, or escalating geopolitical tensions could push the global economy into recession. “This would mark the first time in more than 80 years that two global recessions have occurred within the same decade,” the report said.

Upbeat on India

Talking about India, the report said that the country, which accounts for three-fourths of the region’s output, growth expanded by 9.7 per cent on an annual basis in the first half of fiscal year 2022/23, reflecting strong private consumption and fixed investment growth. Consumer inflation spent most of last year above the Reserve Bank’s upper tolerance limit of 6 per cent, prompting the policy rate to be raised by 2.25 percentage points between May and December. India’s goods trade deficit has more than doubled since 2019, and was $24 billion in November, with deficits for crude petroleum and petroleum products ($7.6 billion) and other commodities (for example, ores and minerals at $4.2 billion) accounting for the widening.

It noted that India used its international reserves (at $550 billion in November, or 16 per cent of GDP) to curb excess exchange rate volatility helping to limit Rupee depreciation, and its sovereign spread has remained broadly stable at 1.4 per cent in December, similar to average levels in the five years before the pandemic.

The report highlighted that the slowdown in the global economy and rising uncertainty will weigh on export and investment growth. Governments increased infrastructure spending and various business facilitation measures, however, will crowd-in private investment and support the expansion of manufacturing capacity. “Growth is projected to slow, to 6.6 per cent in FY2023/24 before falling back toward its potential rate of just above 6 per cent. India is expected to be the fastest growing economy of the seven largest EMDEs,” it said.

Related Topics