New Delhi: India's economic growth rate will come down to 6.6 percent in next financial year from an expected 6.9 percent in 2022-23, said the World Bank in its latest economic update. However, India is expected to be the fastest growing economy of the seven largest emerging-market and developing economies (EMDEs), it said.
The growth rate is 6.9 percent in current fiscal year (April 2022 to March 2023) as compared to 8.7 percent in the previous year. For 2024-25, the growth rate is projected at 6.1 percent. "The slowdown in the global economy and rising uncertainty will weigh on export and investment growth," it said.
The government has increased infrastructure spending and various business facilitation measures. However, it will crowd-in private investment and support the expansion of manufacturing capacity.
"Growth is projected to slow, to 6.6 percent in FY2023-24 before falling back toward its potential rate of just above six percent," it said. The GDP expanded by 9.7 percent on an annual basis in the first half of fiscal year 2022-23, reflecting strong private consumption and fixed investment growth.
Consumer inflation was above the Reserve Bank's upper tolerance limit of six percent, prompting the policy rate to be raised by 2.25 percentage points between May and December.
India's goods trade deficit has more than doubled since 2019, and was USD 24 billion in November, with deficits for crude petroleum and petroleum products (USD 7.6 billion) and other commodities (for example, ores and minerals at USD 4.2 billion) accounting for the widening.
The World Bank said, "India used its international reserves (at USD 550 billion in November, or 16 percent of GDP) to curb excess exchange rate volatility helping to limit the rupee depreciation, and its sovereign spread has remained broadly stable at 1.4 percent in December, similar to average levels in the five years before the pandemic."
"Monetary and fiscal tightening over the forecast horizon is expected to be less pronounced than in much of the rest of the region, as adequate policy buffers have provided breathing room to support the ongoing recovery and boost public investment," it said.
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