The World Bank has reaffirmed its GDP growth forecast for India in the financial year 2023-24, keeping it steady at 6.3 percent, despite a turbulent global environment. In its latest India Development Update (IDU), the international financial institution commended India for displaying remarkable resilience, making it one of the fastest-growing major economies in 2022-23, with a growth rate of 7.2 percent. This positive momentum was attributed to robust domestic demand, substantial public infrastructure investments, and a strengthening financial sector.
Earlier this year, in its April report, the World Bank had revised India’s growth forecast for 2023-24 down to 6.3 percent from the previous estimate of 6.6 percent. However, the recent IDU report underscores India’s ability to withstand international headwinds and emerge as a strong economic performer.
India’s service sector is expected to maintain its strength, projecting a growth rate of 7.4 percent, while investments are anticipated to remain robust at 8.9 percent. This is in line with India’s commitment to fostering a conducive environment for both public and private investments.
Auguste Tano Kouame, World Bank’s Country Director in India, highlighted the short-term challenges posed by the adverse global environment. He emphasized the importance of increasing public spending to attract private investments, thus creating favorable conditions for India to harness global opportunities and achieve higher growth.
Despite ongoing global challenges such as high global interest rates, geopolitical tensions, and sluggish global demand, India’s economic outlook remains optimistic. The World Bank expects that global headwinds will persist and potentially intensify, resulting in a slowdown in global economic growth over the medium term.
Addressing concerns about inflation in India due to adverse weather conditions, the World Bank report predicts a gradual decrease in prices as food prices stabilize and government measures enhance the supply of essential commodities. Dhruv Sharma, Senior Economist at the World Bank and lead author of the report, stated that while headline inflation may temporarily impact consumption, overall conditions will remain conducive for private investment. Additionally, the report foresees an increase in foreign direct investment in India as the global value chain undergoes rebalancing.
India experienced a surge in headline inflation, reaching 7.8 percent in July, primarily driven by price hikes in food items such as wheat and rice. However, it later dropped to 6.8 percent in August.
Fiscal consolidation is expected to continue in India during 2023-24, with the central government fiscal deficit projected to decline from 6.4 percent to 5.9 percent of GDP. Public debt is forecasted to stabilize at 83 percent of GDP.
On the external front, the current account deficit is anticipated to narrow to 1.4 percent of GDP. Foreign investment inflows and substantial foreign reserves are expected to adequately finance the deficit, reinforcing India’s economic stability.
The World Bank’s decision to maintain India’s GDP growth forecast at 6.3 percent underscores the country’s resilience and determination to overcome global challenges, solidifying its position as one of the world’s emerging economic powerhouses. As India continues to focus on fostering investment-friendly policies and infrastructure development, it remains well-positioned to capitalize on future global opportunities and sustain its growth trajectory.
