World Bank, ADB lower India’s economic growth forecasts

Leading multilateral agencies, the World Bank and the Asian Development Bank (ADB), on Tuesday, lowered India’s economic growth projection for the current financial year citing increase in borrowing costs and risks arising from global factors.

The World Bank cut India’s GDP growth forecast for the financial year 2023-24 to 6.3 per cent from its earlier projection of 6.6 per cent. India’s economic growth is expected to be constrained by slower consumption growth and challenging external conditions, the World Bank said in its latest India Development Update released on Tuesday.

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The World Bank has pegged 2022-23 GDP growth for India at 6.9 per cent. This is largely in line with 7 per cent expansion projected by the National Statistical Office (NSO).

In a separate report, the ADB cut India’s economic growth projection for the current financial year to 6.4 per cent from its earlier forecast of 7.2 per cent.

The growth moderation for India in FY2023 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices, ADB noted in its Asian Development Outlook report.

In the fiscal 2024-25, India’s economic growth is likely to improve to 6.7 per cent helped by faster growth in investment on the back of supportive government policies, lower non-performing loans in banks, and significant corporate deleveraging that will enhance bank lending, ADB said.

“The Government of India’s strong infrastructure push under the Prime Minister’s Gati Shakti initiative, logistics development, and industrial corridor development will contribute significantly to raising industrial competitiveness and boosting future growth,” said ADB Country Director for India Takeo Konishi.

Despite the global slowdown, India’s economic growth rate is stronger than in many peer economies, Konishi added.

Both the multilateral agencies projected moderation in inflationary pressure during the current financial year.

According to the World Bank, India’s headline inflation is expected to decline to 5.2 per cent in 2023-24 amid easing global commodity prices and moderation in domestic demand.

ADB projects even sharper moderation in inflation pegging it at 5 per cent for fiscal 2023-24 and further down at 4.5 per cent for 2024-25.

ADB, however, noted that the “monetary policy in FY2023 is expected to be tighter as core inflation persists, while becoming more accommodative in FY2024.”

The current account deficit is projected to decline to 2.2 per cent of GDP in FY2023 and 1.9 per cent in FY2024.

Growth in goods exports is forecast to moderate in FY2023 before improving in 2024, as production-linked incentive schemes and efforts to improve the business environment, such as streamlined labour regulations, improve performance in electronics and other areas of manufacturing growth, ADB said.

Services exports growth has been robust and is expected to continue to strengthen India’s overall balance of payments position, it added.