The World Bank, in its latest development update on Tuesday, projected India’s GDP growth this financial year to be 6.3% — a decline compared to last year but same as WB’s earlier projection. India’s GDP growth was 7.2% last financial year.
However, the international financial institution warned that global recession fears could lead to depressed foreign demand and monetary policy tightening. Of immediate concern are increasing food prices, keeping headline inflation figures high.
Also worrying is the trade deficit, which has reflected a sharp contraction in exports due to slower global growth (read: demand). The current account deficit has also widened to 1.1% in the April-May period.
However, World Bank economists feel the positives related to India’s economic front still outweigh the risks. Fiscal deficit has declined, along with public debt-to-GDP ratio. Foreign investments have remained resilient so far. "Investment growth is higher than average than what it was over last several years, it is now moderating," said Dhruv Sharma, World Bank senior economist, putting it in perspective.
"We’re expecting inflation to moderate, though food prices (are a worry), but they are definitely within the central bank’s comfort levels," said Sharma.
He also played down worries over a below-par monsoon. "My understanding is that sowing was much higher this year," he said, adding that Indian economy was resilient and 'macro stable' when it came to likely oil prices increase or any domino effect of US Federal Reserve decisions.
"India remained one of the fastest growing major economies in the world in financial year 2022-23," says the Development Update. While it warned growth with decelerate and a global depression of demand, it was optimistic about India — "Strong investment will drive growth (in India)," World Bank’s latest projection said.
"An adverse global environment will continue to pose challenges in the short-term," said Auguste Tano Kouame, World Bank's Country Director in India. "Tapping public spending that crowds in more private investments will create more favorable conditions for India to seize global opportunities in the future and thus achieve higher growth," he added.
