According to a World Bank report released on Tuesday, the prediction for the GDP growth rate for the current fiscal year has been raised from 6.5% to 6.9% in the organization’s India Development Update.
Details of the report
The report, named “Navigating the Storm,” stated that while India’s development prospects will be affected by the worsening external environment, the country’s economy is better positioned than most other emerging countries to withstand global spillovers. The Indian economy would grow less in 2022–2023 than it did in 2021–2022 (8.7%), according to the report, as a result of tightening global monetary policy cycles, slower global growth, and high commodity prices. Despite these obstacles, it was noted that the report anticipates India to post solid GDP growth and continue to be one of the world’s fastest expanding major economies thanks to strong domestic demand. One of the main economies with the fastest predicted growth rates is that of India. According to the report, India might become a desirable alternative investment location as a result of the slowdown in emerging countries. As per the research, annual average retail inflation will be 7.1%. According to the World Bank’s India Development Update, China, the US, and the Euro area all have an impact on India. However, it showed that the government would achieve its 6.4% GDP budget deficit goal in 2022–2023. The World Bank predicts that India’s GDP growth will moderate to 6.9% in the current fiscal year from 8.7% in FY 21–22. High commodity prices and restrictive monetary policy were mentioned in the report as factors affecting the growth of the nation.
GDP rates in the past
Retail inflation based on the consumer price index (CPI), which the RBI primarily considers when determining its monetary policy, is beginning to moderate but since January of this year remained above the central bank’s upper tolerance limit of 6%.Inflation decreased to 6.77 percent in October from 7.41 percent the month before, primarily as a result of lower food basket prices, but it continued to be above the Reserve Bank’s tolerance zone for the tenth consecutive month.Compared to the growth of 13.5% in the first three months of the fiscal year, GDP growth decreased to 6.3% in the second quarter.
Commodity price increases and tightening monetary policies by central banks around the world have hurt India, just like they do its other global competitors.The World Bank is optimistic, meanwhile, that India will be significantly less affected by the global recession than other emerging economies. Dhruv Sharma, an economist with the World Bank, noted that while public debt had decreased, they have had no concerns about the sustainability of India’s debt at this stage.
RBI’s monetary policy committee
The three-day meeting of the RBI’s monetary policy committee got underway on Monday.
The slowing GDP growth and rising inflation of more than 6% will be the backdrop against which the RBI will present its monetary policy. Nevertheless it is anticipated that the MPC will raise rates again this year, but in a smaller increment of 25 to 35 bps , indicated Bank of Baroda Chief Economist Madan Sabnavis. Key government figures, including the finance minister, have stated that India remains a bright spot among the global headwinds. Shaktikanta Das has ruled out a recession for India.However, the majority of them, including foreign brokerages and rating agencies, have recently lowered their projections for India’s economic development.
Growth is likely to be hampered by the anticipated stagnation in Europe and North America as well as China’s weak economy, while Russia’s onslaught on Ukraine continues.
Other predictions in GDP
Global GDP will undoubtedly be negatively impacted throughout the first quarter of 2023 by geopolitical unpredictability, synchronised monetary tightening, and rising oil prices, according to SBI. Due to sluggish growth in the manufacturing and mining sectors, India’s gross domestic product (GDP) growth for the July-September quarter fell to 6.3% from 8.4% a year earlier and 13.5% in the prior quarter.
In the midst of the turbulence throughout the world, this is the first revision to any international agency’s growth forecast for India. It follows the World Bank’s reduction of India’s GDP growth prediction from 7.5% to 6.5%.