World Bank news: World Bank lowers India FY24 growth forecast to 6 3%

“While gross FDI investments were positive and stable at around USD 7.3 billion, FDI by India abroad spiked to USD 5.2 billion, bringing down net FDI flows,” it said. But the global economy has proved surprisingly resilient in the face of higher borrowing costs, and the World Bank predicts that growth will accelerate to 2.4% in 2024. In its outlook, the World Bank said that the global economy is likely slowing sharply this year, hobbled by high interest rates, the repercussions of Russia’s invasion of Ukraine and the lingering effects of the coronavirus pandemic.

And, we haven’t really generated reforms which will generate growth,” the Financial Express reported him as saying. He further added that the concentration of wealth is with a few industrialists and that we must fight for fair competition in the economy. Increased infrastructure spending and “business facilitation measures” will, however, crowd-in private investment and support the expansion of manufacturing capacity, it added, according to Reuters. The World Bank report noted that inflation is elevated, but overall pressures are moderating as food and fuel prices moderate. It noted that the inflation level, however, is above the upper threshold of the Reserve Bank of India’s target range of 2-6 per cent. Borrowing costs, and government consumption by fiscal consolidation,” the World Bank said.

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Elevated global and domestic food prices are contributing to greater food insecurity for South Asia’s poor who spend a larger share of income on food, it said. A high trade deficit pushed the country’s current account deficit to an all-time high of $36.4 billion, or 4.4% of the GDP, in the second quarter of FY23. “But we see some signs of moderation in global environment, which also implies moderation in India,” Kouame said hinting at the current geo-political turmoil affecting global supply chains and inflation triggering tightening of interest rates by central banks. The reopening of China is, however, a positive development and “India will benefit” from that, he added. Economic conditions have improved, it said, noting that terms of trade have become more favorable since the second half of 2022, and large trade deficits caused by high import commodity prices have partially receded. The World Bank said in its latest Global Economic Prospects report that global growth is likely to slow to 2.1% in 2023, with prospects clouded by financial risks but that’s up from a 1.7% forecast issued in January. ”The main reason for the downgrade of the forecast is weak consumption, and also tightening of fiscal policies, and especially tightening of the current expenditure by the government.

All countries in the region except Bhutan have downgraded their forecasts, the World Bank said in its report.

“Global economic activity has softened, and financial conditions have hardened on the back of a synchronized global monetary policy tightening to manage elevated inflation. Despite these challenging external economic conditions, India was one of the fastest growing major economies in the world in 2022,” World Bank said in its latest India Development Update report. The World Bank expects global growth to decelerate sharply in 2023 to 1.7 per cent from the 3 per cent it predicted six months ago. The report further highlighted that policy tightening, high inflation, worsening financial conditions and continued disruptions from Russia’s invasion of Ukraine have sharply dented global economic growth prospects. On the external front, the current account deficit is projected to narrow to 2.1 per cent of GDP from an estimated 3 per cent in the current financial year on the back of robust service exports and a narrowing merchandise trade deficit. But high external debt and tightened global financial conditions pose risks to Maldives’ fiscal and external accounts, and in Nepal, external shocks, domestic import restrictions, and monetary tightening are expected to hamper growth, said the report. But high external debt and tightened global financial conditions pose risks to Maldives’ fiscal and external accounts, and in Nepal, external shocks, domestic import restrictions, and monetary tightening are expected to hamper growth, said the report.

“China re-opens, it adds to the global growth” and that will also indirectly benefit India, he explained. Further, the report added, unemployment declined to 6.8 percent in the first quarter of 2023, the lowest since the onset of the COVID-19 pandemic, and labor force participation increased. India’s headline consumer price inflation has returned to within the central bank’s 2-6 percent tolerance band. He added that India’s economy has rebounded fairly robustly following the contraction that occurred during the pandemic year. “This story of the rebound has been driven largely by robust domestic demand” said Sharma. The ADB report projected moderation in inflation to 5 per cent while Current Account Deficit to 2.2 per cent in the current financial year.

Even as headline inflation is elevated, it is projected to decline to an average of 5.2 percent in FY23/24, amid easing global commodity prices and some moderation in domestic demand. The World Bank added that the government is likely to meet its fiscal deficit target of 5.9 percent of GDP in FY23/24 and combined with consolidation in state government deficits, the general government deficit is also projected to decline. On the external front, the current account deficit is projected to narrow to 2.1 percent of GDP from an estimated 3 percent in FY22/23. The World Bank’s biannual report also cautioned about “headwinds to India’s growth” in FY24. “Recent financial sector turmoil in the US and Europe could reduce appetite for emerging market assets, trigger another bout of capital flight and put pressure on the Indian rupee,” it said. “Tighter global financial conditions could also weigh on the risk appetite for private investment in India,” it added. The report, which factored in developments up to March 31, did not take into account the recent spike in fuel rates after producers’ cartel OPEC+ pledged to cut output recently.

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The eurozone, which represents the 20 countries that share the euro currency, is expected to post collective growth of 0.4% this year. The United States has continued to generate unexpectedly robust job gains ’employers added 339,000 workers in May, far more than economists had forecast’ even though the Fed has raised its benchmark rate 10 times in the past 15 months. Still, the bank’s latest Global Economic Prospects report, which it issued Tuesday, marks an upgrade from its previous forecast in January. In its latest estimates released on January 6, the World Bank said that India may grow at 7% in FY23, which is higher than the projections made by the RBI and the World Bank. The RBI and the World Bank have projected 6.8% and 6.9% GDP growth, respectively, in FY23.

Global trade, it said, slowed in the second half of 2022 which showed the slowdown in industrial production and economic activity across advanced economies. China witnessed its slowest pace in economic activity since the mid-1970s due to COVID-19 related restrictions, droughts, and ongoing property sector stress. However, high frequency indicators improved in January and February aided by the reopening of the Chinese economy. Also, growth outcomes for the United States and the euro area in the fourth quarter of calendar year 2022 were also better than expected, the World Bank said. Financial conditions eased in January-February 2023 with an increase in financial flows to emerging Markets and Developing Economies .