The World Bank revised down its growth forecast for India for 2023-24 due to a slowdown in private consumption and a sharp global slowdown, but said the country would remain a fast-growing global economy.
FY24 GDP growth in Asia’s third-largest economy is seen at 6.3%, compared with a previous estimate of 6.6% in January, according to the bank’s latest Global Economic Prospects report released on Tuesday.
The global economy is expected to “slow substantially” this year, with a “significant slowdown” in advanced economies, the report added.
According to the report, India’s private investment is likely to have boosted rising corporate profits, while unemployment fell to 6.8% in the first quarter of 2023, the lowest since the outbreak of the COVID-19 pandemic. Labor force participation has also increased, he said.
The downward revision of India’s GDP in 2024 mainly reflects the lagged impact of tightening domestic policy and global financing conditions. India’s higher-than-expected resilience in private consumption, which continues to lag, and investment and a strong services sector “support growth” in 2023, the bank said. Headline consumer price inflation in India has returned to the central bank’s 2-6% tolerance band.
“In India, which accounts for three-quarters of the region’s (South Asia) output, growth in early 2023 remained below the level reached in the decade before the pandemic, as higher prices and rising borrowing costs weighed on private consumption,” the report said. he said.
India’s economy grew 7.2% in 2022-23 from a year earlier, more than initially estimated, while GDP growth accelerated to 6.1% in January-March, showing the economy is recovering, estimates released by the National Statistical Office (NSO).
Global growth has slowed sharply and the risk of financial stress in emerging markets and developing economies (EMDEs) is intensifying due to elevated global interest rates, the bank said.
According to the bank’s assessment, global growth is expected to slow from 3.1% in 2022 to 2.1% in 2023. In EMDE countries excluding China, growth is expected to slow to 2.9% this year from 4.1% last year. These latest forecasts reflect a downgrade across the board from earlier estimates.
