World Bank maintains India's 6.3% GDP growth forecast for 2023-24 amid global challenges

New Delhi, October 3: The World Bank has maintained its GDP growth projection for India in the fiscal year 2023-24 at 6.3 per cent. It noted India's resilience in the face of a challenging global environment, despite having previously lowered the growth forecast from 6.6 per cent in its April report.

According to the latest India Development Update (IDU) by the World Bank, which is the institution's flagship half-yearly report on the Indian economy, India demonstrated remarkable growth in 2022-23, registering a growth rate of 7.2 per cent. This growth was the second-highest among G20 countries and nearly double the average for emerging market economies. It was attributed to robust domestic demand, significant public infrastructure investments, and a strengthening financial sector.

Bank credit in India for the current fiscal year saw notable growth of 15.8 per cent in the first quarter, compared to 13.3 per cent in the previous fiscal year's first quarter. The service sector in India is expected to maintain its strength with a growth rate of 7.4 per cent, while investment growth is projected to remain robust at 8.9 percent.

Auguste Tano Kouame, World Bank's Country Director in India, acknowledged the short-term challenges posed by an adverse global environment. He emphasised the importance of leveraging public spending to attract private investments, creating more favorable conditions for India to seize global opportunities and achieve higher growth.

The World Bank anticipates ongoing global challenges due to factors like high global interest rates, geopolitical tensions, and sluggish global demand, leading to a slowdown in global economic growth in the medium term.

Regarding the recent spike in inflation in India caused by adverse weather conditions, the World Bank's report suggests that prices are expected to gradually decrease as food prices normalise and government measures increase the supply of essential commodities. While the spike in headline inflation may temporarily limit consumption, overall conditions are expected to favor private investment. Foreign direct investment in India is also likely to increase as the global value chain continues to rebalance.

Headline inflation in India rose to 7.8 per cent in July, but later fell to 6.8 per cent in August. The World Bank also expects fiscal consolidation in 2023-24, with the Central Government fiscal deficit projected to decrease from 6.4 per cent to 5.9 per cent of GDP. Public debt is expected to stabilise at 83 percent of GDP. On the external front, the current account deficit is projected to narrow to 1.4 per cent of GDP, with sufficient financing from foreign investment flows and substantial foreign reserves.