The World Bank has decided to retain its GDP growth projection for India in the financial year 2023-24 at 6.3 percent. In its latest India Development Update (IDU), a semi-annual report on the Indian economy, the World Bank noted that India has demonstrated resilience amidst a challenging global environment. Earlier this year, the World Bank had revised India's growth forecast for 2023-24 from 6.6 percent to 6.3 percent in its April report.
Despite substantial global challenges, the World Bank highlighted that India emerged as one of the fastest-growing major economies in the fiscal year 2022-23, with a growth rate of 7.2 percent. This growth rate was the second-highest among G20 countries and nearly double the average for emerging market economies. The report attributes this resilience to robust domestic demand, substantial public infrastructure investments, and a strengthening financial sector.
During this fiscal year, bank credit in India witnessed a growth of 15.8 percent in the first quarter, compared to 13.3 percent in the corresponding period of the previous fiscal year. The service sector in India is projected to maintain its strength with a growth rate of 7.4 percent, while investment growth is expected to remain robust at 8.9 percent.
Adverse global environment
Auguste Tano Kouame, the Country Director of the World Bank in India, acknowledged the short-term challenges posed by an adverse global environment. He emphasised the importance of public spending that attracts private investments to create more favorable conditions for India to seize global opportunities and achieve higher growth in the future.
The World Bank anticipates ongoing global headwinds due to factors such as high global interest rates, geopolitical tensions, sluggish global demand, and consequently, a slowdown in global economic growth over the medium term.
Regarding the recent inflation spike in India attributed to adverse weather conditions, the report suggested that inflation is expected to gradually decrease as food prices normalise, and government measures increase the supply of essential commodities. The report also predicts a moderation in inflation's impact on consumption, with overall conditions remaining conducive for private investment. Additionally, the volume of foreign direct investment is likely to increase in India as the global value chain rebalances.