World Bank: India's FY24 GDP Forecast Holds at 6.3%
The World Bank has decided to keep its growth projection for India in the fiscal year 2023–24 steady at 6.3%. This decision is based on India's impressive economic performance despite facing significant external challenges. Earlier, the bank had revised its growth forecast for India in April.
In its latest India Development Update, the World Bank highlighted India's resilience in the face of a challenging global environment. India's economic strength is attributed to several key factors, including strong domestic demand and a significant increase in bank credit growth, which rose to 15.8% in the first quarter of FY23/24, up from 13.3% in the same period of FY22/23.
However, the World Bank also recognized that the Indian economy is grappling with various challenges due to global headwinds, including sluggish demand, high interest rates, and geopolitical tensions. These global challenges are expected to persist and potentially intensify due to factors such as elevated global interest rates, geopolitical conflicts, and subdued global demand. As a result, global economic growth is expected to slow down in the medium term.
Despite these challenges, the World Bank maintains its forecast for India's GDP growth in FY23–24 at 6.3%. Auguste Tano Kouame, the World Bank's Country Director in India, noted that adverse global conditions will continue to pose short-term challenges. To overcome these challenges, he suggested that leveraging public spending to stimulate private investments would create more favorable conditions for India to tap into global opportunities and achieve higher future growth.
The World Bank also highlighted the impact of rising inflation in India, primarily attributed to adverse weather conditions. In recent months, unfavorable weather has led to a spike in inflation, with headline inflation reaching 7.8% in July due to surges in food prices, such as wheat and rice. The bank expects inflation to gradually subside as food prices normalize and government measures improve the supply of essential commodities.
Dhruv Sharma, senior economist at the World Bank and lead author of the India Development Update report, anticipates a temporary effect of the inflation spike on consumption but foresees an overall conducive environment for private investment.
Additionally, the report predicts that foreign direct investment in India will likely expand as global value chains continue to rebalance.
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