World Bank trims FY24 India growth, sees sharp slowdown in global economy

The World Bank has revised downwards its 2023-24 growth forecast for India due to a drag in private consumption and a sharp global slowdown but said the country will remain the world’s fast-growing economy.

GDP growth for FY24 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 projected to “slow substantially” this year, with a “pronounced deceleration” in advanced economies, the report added.

According to the report, India’s private investment was likely boosted by increasing corporate profits while unemployment declined to 6.8% in the first quarter of 2023, the lowest since the onset of the COVID-19 pandemic. Labour force participation also increased, it said.

The downward revision to 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 however continues to lag, and investment and a robust services sector are “supporting growth” in 2023, the bank said. India’s headline consumer price inflation has returned to within the central bank’s 2-6% tolerance band.

“In India, which accounts for three-quarters of output in the region (South Asia), growth in early 2023 remained below what it achieved in the decade before the pandemic as higher prices and rising borrowing costs weighed on private consumption,” the report said.

India’s economy grew 7.2% in 2022-23 from a year ago, higher than previously estimated, while GDP growth for the January-March quarter accelerated to 6.1%, pointing to an economy on the mend, estimates released by the National Statistical Office (NSO) on May 31 showed.

Global growth has slowed sharply and the risk of financial stress in emerging market and developing economies (EMDEs) is intensifying amid elevated global interest rates, the bank said.

According to the bank’s assessment, global growth is projected to decelerate from 3.1% in 2022 to 2.1% in 2023. In EMDEs other than China, growth is set to slow to 2.9% this year from 4.1% last year. These latest forecasts reflect broad-based downgrades from earlier estimates.