World Bank upgrades India’s GDP growth forecast to 6.9%
The World Bank in October had cut India’s GDP growth forecast to 6.5%
NEW DELHI: The World Bank on Tuesday revised upwards its gross domestic product (GDP) growth forecast for India to 6.9% for 2022-23, saying the economy was showing higher resilience to global shocks.
In its India Development Update, the World Bank said the revision was due to higher resilience of the Indian economy to global shocks and better-thanexpected second quarter numbers.
India’s economy grew at 6.3% in September quarter 2022-23 as compared to 13.5% in the preceding June quarter, mainly on account of contraction in output of manufacturing and mining sectors.
This is the first upgrade of India’s growth forecast by any international agency amid the global turmoil.
In October, the World Bank had cut India’s GDP growth forecast to 6.5% from 7.5% earlier. Now, it has upgraded the projection to 6.9% for 2022-23 (April 2022 -March 2023).
The report titled ‘Navigating the Storm’, said while the deteriorating external environment will weigh on India’s growth prospects, the economy is relatively well positioned to weather global spillovers compared to most other emerging markets.
Impact of a tightening global monetary policy cycle, slowing global growth and elevated commodity prices will mean that the Indian economy will experience lower growth in 2022-23 compared to 2021-22 (8.7%), it said.
Despite these challenges, it said, the update expects India to register a strong GDP growth and remain one of the fastest growing major economies in the world, due to a robust domestic demand.
“The World Bank has revised its 2022- 23 GDP forecast upward to 6.9% from 6.5% (in October 2022), considering a strong outturn in India in second quarter (July-September) of 2022- 23 financial year,” the India Development Update said.
“India’s economy has been remarkably resilient to the deteriorating external environment, and strong macroeconomic fundamentals have placed it in good stead compared to other emerging market economies,” World Bank’s Country Director in India Auguste Tano Kouame told reporters.
However, Kouame said, continued vigilance is required as adverse global developments persist.
The report projected that the Indian economy will grow at slightly lower rate of 6.6% in 2023-24.
“A challenging external environment will affect India’s economic outlook through different channels...rapid monetary policy tightening in advanced economies has already resulted in large portfolio outflows and depreciation of the rupee while high global commodity prices have led to a widening of the current account deficit,” it noted.
The report said India’s economy is relatively insulated from global spillovers compared to other emerging markets because India has a large domestic market and is relatively less exposed to international trade flows.
The country however remains affected by spillovers from the US, Euro area and China.
The report finds that while 1 percentage point decline in growth in the US is associated with a 0.4% point fall in India’s growth, the effect is around 1.5 times larger for other emerging economies, it said, adding, analysis for growth spillovers from the European Union (EU) and China also yields similar results.
India’s external position has also improved considerably over the past decade and the current account deficit is adequately financed by improving foreign direct investment inflows and a solid cushion of foreign exchange reserves.
It may be noted that India has one of the largest holdings of international reserves in the world.
With regard to reforms, the report said, prudent regulatory measures have also played a key role in developing resilience in the economy.
Increased reliance on market borrowings has improved the transparency and credibility of fiscal policy and the government has diversified the investor base for government securities, it said.