The World Bank has retained India's gross domestic product (GDP) growth forecast for fiscal year 2023-24 at 6.3 percent, saying the country has continued to show resilience in its performance against the backdrop of a challenging global environment. In its April report, the World Bank had reduced India's growth rate forecast for 2023-24 to 6.3 percent from the earlier 6.6 percent.
According to the World Bank's latest India Development Update (IDU) released on Tuesday, the international financial institution's key half-yearly report on the Indian economy states that despite significant global challenges, India is set to be the fastest growing major economy at 7.2 percent in 2022-23. One of the economies.
The World Bank said in its report, "India's growth rate is the second highest among G-20 countries and almost twice the average of emerging market economies. This resilience is driven by strong domestic demand, strong public infrastructure investment and a strong financial sector."
The country's bank credit increased by 15.8 percent in the first quarter of the current financial year, whereas it had increased by 13.3 percent in the first quarter of the previous financial year. India's services sector activity is expected to remain strong with growth of 7.4 percent and investment growth is also expected to be strong at 8.9 percent.
"The adverse global environment will continue to pose challenges in the short term," said Auguste Tano Koume, World Bank Country Director in India. "Taxing public spending will create more favorable conditions for India to take advantage of future global opportunities," he said. and thus higher development will be achieved."
The World Bank expects global challenges to continue and intensify due to high global interest rates, geopolitical tensions and sluggish global demand and as a result, global economic growth is also likely to slow in the medium term. Asked about adverse weather conditions in India, the World Bank said in the report that prices are expected to gradually decline as food prices normalize and government measures increase the supply of key commodities.
“The rise in headline inflation may temporarily impact consumption, but we expect it to moderate,” he said. "Overall, conditions will remain favorable for private investment," said Dhruv Sharma, senior World Bank economist and lead author of the report. "The volume of foreign direct investment into India is also likely to increase as the rebalancing of global value chains continues," he said. .
Headline inflation in India rose to 7.8 percent in July, which later declined to 6.8 percent in August due to rise in prices of food items like wheat and rice. Furthermore, the World Bank expects fiscal consolidation to continue in 2023–24 and the central government fiscal deficit is projected to decline from 6.4 percent of GDP to 5.9 percent.
Public debt is expected to stabilize at 83 percent of GDP. On the external front, the current account deficit is expected to narrow to 1.4 percent of GDP, and is to be adequately financed supported by foreign investment inflows and large foreign reserves.
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