India’s GDP growth for FY23/24 to be at 6.3%, forecasts World Bank

The World Banks forecasts India’s GDP growth for financial year 2023-2024 to be at 6.3 per cent despite intensifying global headwinds. In its latest India Development Update (IDU), the World Bank on Tuesday said, “Service sector activity is expected to remain strong with growth of 7.4 per cent and investment growth is also projected to remain robust at 8.9 per cent. The IDU expects that global headwinds will continue to persist and intensify due to high global interest rates, geopolitical tensions, and sluggish global demand. As a result, global economic growth is also set to slow down over the medium term against a background of these combined factors. “India continues to show resilience against the backdrop of a challenging global environment,” the report said. India a fastest-growing major economy The World Bank, in the IDU, said it observed that India was one of the fastest-growing major economies in financial year (FY) 2022-2023 at 7.2 per cent, despite significant global challenges. “India’s growth rate was the second highest among G20 countries and almost twice the average for emerging market economies. This resilience was underpinned by robust domestic demand, strong public infrastructure investment and a strengthening financial sector,” the IDU stated. Bank credit growth increased to 15.8 per cent in the first quarter of FY23/24 compared with 13.3 per in the first quarter of FY22/23. “An adverse global environment will continue to pose challenges in the short-term,” said Auguste Tano Kouame, World Bank’s Country Director in India. “Tapping public spending that crowds in more private investments will create more favorable conditions for India to seize global opportunities in the future and thus, achieve higher growth,” Kouame said. The IDU further mentioned that a spike in inflation in recent months in India was due to adverse weather conditions. Headline inflation rose to 7.8 per cent in July due to a surge in prices of food items like wheat and rice. “Inflation is expected to decrease gradually as food prices normalise and government measures increase the supply of key commodities,” it added. “While the spike in headline inflation may temporarily constrain consumption, we project a moderation. Overall conditions will remain conducive for private investment,” said Dhruv Sharma, Senior Economist, World Bank said. “The volume of foreign direct investment is also likely to grow in India as rebalancing of the global value chain continues," Sharma said. “The World Bank expects fiscal consolidation to continue in FY23/24 with the central government fiscal deficit projected to continue to decline from 6.4 per cent to 5.9 per cent of GDP. Public debt is expected to stabilize at 83 per cent of GDP. On the external front, the current account deficit is expected to narrow to 1.4 per cent of GDP, and it will be adequately financed by foreign investment flows and supported by large foreign reserves,” the IDU stated.