The World Bank estimates 6.3% GDP growth for India as new global challenges arise

India’s GDP growth is expected to be 6.3% between 2023 and 2024, according to the World Bank, as global headwinds start to become a hindrance.

According to the World Bank’s India Development Update (IDU) report, which was published on Tuesday, the external challenges and declining pent-up demand are the major causes of the anticipated deceleration (from 7.2 percent in 2022-23).

However, the research notes that activity in the service sector is anticipated to expand by 7.4%, and investment growth is anticipated to grow by 8.9% as well.

According to the World Bank, despite a difficult global climate, India continues to demonstrate resilience.

Despite considerable global problems, India’s economy grew at one of the quickest rates among developed nations in FY22/23, according to The IDU, the Bank’s premier half-yearly assessment on the Indian economy.

India had the second-highest growth rate among the G20 nations and almost doubled that of emerging market economies.

Strong public infrastructure investment, strong domestic demand, and a growing financial sector all contributed to this resiliency. According to the study, bank credit growth grew to 15.8% in the first quarter of FY23/24 from 13.3% in the same period of FY22/23.

Due to high global interest rates, geopolitical unrest, and weak global demand, the IDU anticipates that headwinds will continue to exist and worsen.

As a consequence of these combined variables, global economic growth is expected to slow down during the medium term.

In the medium term, an unfavorable global climate would continue to provide difficulties, according to Auguste Tano Kouame, the World Bank’s Country Director in India.

By increasing private investment via public expenditure, India will be better positioned to take advantage of future global possibilities and experience stronger growth.

In recent months, inflation has increased as a result of unfavorable weather.

Due to an increase in the price of basic products including wheat and rice, headline inflation increased to 7.8% in July. As food prices return to normal and government initiatives enhance the supply of essential goods, inflation is anticipated to gradually decline.

“We predict a moderation, even if the rise in headline inflation may momentarily restrain spending. Dhruv Sharma, Senior Economist at the World Bank and the report’s principal author, predicted that overall circumstances would continue to be favorable for private investment.

As the global value chain continues to be rebalanced, foreign direct investment is also projected to increase in India.

According to the World Bank, fiscal consolidation will continue in FY23/24, with a forecast decrease in the central government’s budget deficit from 6.4% to 5.9% of GDP.

At 83% of GDP, public debt is predicted to stabilize.

In terms of the external situation, it is anticipated that the current account deficit would decrease to 1.4% of GDP, and that it will be fully covered by foreign investment flows and supported by sizable foreign reserves.