The World Bank has released its latest edition of Global Economic Prospects, which includes a revised growth forecast for India. According to the report, India’s growth is expected to slow to 6.3% in the fiscal year 2023/24, a downward revision of 0.3 percentage points from January’s projection. This deceleration reflects various factors impacting the Indian economy.
The World Bank attributes the slowdown in India’s growth to constraints on private consumption due to high inflation and rising borrowing costs. Additionally, government consumption is affected by fiscal consolidation measures. Despite these challenges, the report highlights unexpected resilience in private consumption and investment, as well as robust growth in the services sector. These factors contribute to a slightly improved growth outlook for 2023.
Ajay Banga, the newly-appointed President of the World Bank Group, emphasizes the importance of employment for poverty reduction and prosperity. He acknowledges that slower growth makes job creation more difficult, underscoring the need for collective efforts to address this issue.
The World Bank report also provides insights into other global economic trends. It projects a deceleration in global growth from 3.1% in 2022 to 2.1% in 2023. In Emerging Markets and Developing Economies (EMDEs) outside of China, growth is expected to slow to 2.9% this year compared to 4.1% in the previous year. These downward revisions reflect broad-based challenges faced by various economies.
While India’s growth is projected to slow in the near term, the World Bank anticipates a slight pickup in growth through the fiscal year 2025/26. This projection is based on expectations of inflation moving back towards the midpoint of the tolerance range and the potential payoff of reforms. Despite the slowdown, India is expected to remain the fastest-growing economy among the largest EMDEs in terms of both aggregate and per capita GDP.
The World Bank’s report highlights the complexities and dynamics of India’s economic landscape, underscoring the importance of addressing inflation, borrowing costs, and fiscal consolidation to support sustainable growth. It also recognizes the positive contributions of private consumption, investment, and the services sector to India’s economic resilience.
