Growth in India is expected to slow to 6.3% in FY2023: World Bank

Washington: Growth in India is expected to slow to 6.3 percent in FY 2023-24 (April-March), a 0.3 percentage point downward revision from January, the World Bank said Tuesday but noted there is an unexpected resilience in private consumption and investment and robust growth in the services. The World Bank made these points in its latest edition of Global Economic Prospects according to which global growth is projected to decelerate from 3.1 percent in 2022 to 2.1 percent in 2023.

Growth is set to slow to 2.9% this year

In Emerging Markets and Developing Economies (EMDEs) other than China, growth is set to slow to 2.9 percent this year from 4.1 percent last year. These forecasts reflect broad-based downgrades. "Growth in India is expected to slow further to 6.3 percent in FY 2023/24 (April-March), a 0.3 percentage point downward revision from January," the World Bank said.

Slower growth makes job creation a lot harder: Banga

"The surest way to reduce poverty and spread prosperity is through employment and slower growth makes job creation a lot harder," said Ajay Banga, the newly-appointed World Bank Group President. "It's important to keep in mind that growth forecasts are not destiny. We have an opportunity to turn the tide but it will take us all working together," he said.

Growth is projected to pick up slightly through FY 2025-26

In its report, the World Bank attributed the slowdown in India's growth to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation. "Growth is projected to pick up slightly through FY 2025-26 as inflation moves back toward the midpoint of the tolerance range and reforms payoff. India will remain the fastest-growing economy (in terms of both aggregate and per capita GDP) of the largest EMDEs," it said.

Growth in early 2023 remained below what it achieved in the decade

In India, which accounts for three-quarters of output in 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. However, manufacturing rebounded into 2023 after contracting in the second half of 2022, and investment growth remained buoyant as the government ramped up capital expenditure. Private investment was also likely boosted by increasing corporate profits, it said.

India's headline CPI has returned to within the central bank's 2-6% tolerance band

Unemployment, it said, declined to 6.8 percent in the first quarter of 2023, the lowest since the onset of the COVID-19 pandemic, and labour force participation increased. India's headline consumer price inflation has returned to within the central bank's 2-6 percent tolerance band, it said.
"Greater-than-expected resilience in private consumption and investment, and a robust services sector in India, is supporting growth in 2023," said the Bank.

There is possibility of upward revision in 2023

"Unexpected resilience in private consumption and investment, and robust growth in the services sector in India, underlie an upward revision to growth in 2023. The lagged impact of tightening domestic policy and global financial conditions, and the aftermath of crises and natural disasters in several economies, are expected to temper growth in 2024," the World Bank said in its annual growth projections.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Google News. Click here to follow. Also, join PSU Watch Channel in your Telegram. You may also follow us on Twitter here and stay updated.)