Growth Forecast For India’s Economy : World Bank
The World Bank recently lifted its growth forecast for India’s economy this year to 6.9%, after having downgraded it to 6.5% in October, 2022, citing resilience in economic activity despite a deteriorating external environment.
- It was released by World Bank.
- India Development Report titled ‘Navigating the Storm’.
- It revised the GDP forecast considering the strong upturn in the July to September quarter of 2022-23, when it grew 3% despite inflationary pressures and tighter financing conditions, “driven by strong private consumption and investment”.
- The government’s focus on bolstering capital expenditure also supported domestic demand in the first half of 2022-23.
- It expects the Indian economy to grow at a slightly slower 6.6% in 2023-24 as a challenging external environment and faltering global growth will affect its economic outlook through different channels.
- The report said that while a one percentage point decline in growth in the United States is associated with a 0.4 percentage point decline in India’s growth, the effect is around 1.5 times larger for other emerging economies, and the result is similar for growth spillovers from the EU and China.
- It cautions about trade-offs between trying to limit the adverse impact of global spillovers on growth and the available policy space.
- The RBI’s gradual withdrawal of liquidity and policy rate hikes have been aimed at anchoring inflation expectations.
- However, this has increased borrowing costs, which along with elevated input prices have potentially constrained private investment.
- RBI’s management of short-term volatility in exchange rates has contributed to a decline in reserves, though they are still at a relatively high level.
- A widening goods trade deficit, driven by rising imports and softening exports, has expanded India’s current account deficit to 2.8% of GDP in Q2 this year from 1.5% in the first quarter.