The World Bank on Thursday downgraded the real gross domestic product (GDP) growth forecast for India to 6.5% for the fiscal year 2022-23 (FY23), from the previous one of 7.5%. The body also stated in its report that the effects of the Russian invasion of Ukraine will impact the economic performance of India.
Also, the global monetary tightening measures will weigh on the growth rate. In its bi-annual report on South Asia, the World Bank said, “Private Investment growth is likely to diminish due to high uncertainty and higher finance costs.”
The institution also reported that as global demand had plunged in the recent past and it will significantly impact the country’s exports.
This is the third cut in the World Bank’s forecast of India’s GDP growth. Earlier in June, it was revised to 7.5% for FY23 while in April it was slashed from 8.7% to 8%.
The Reserve Bank of India has also recently downgraded the real GDP growth projection by 20 basis points to 7% from the 7.2% estimated earlier. The revision was made on account of geopolitical tensions and global monetary tightening policies. RBI’s previous cut was made in April when it was slashed by 60 basis points from 7.8%.
India’s real GDP grew by 13.5% in the first quarter of FY23. This was led by strong growth in private consumption and investment expenditure.
According to a forecast by United Nations Conference on Trade and Development (UNCTAD) Report 2022, “India’s GDP growth will further reduce to 4.7% in FY23. India recorded a growth of 8.2% in the year 2021, the top among all G20 nations.” The report cited the supply chain disruptions and rising domestic demand which turned the current account surplus into a deficit, as the reasons behind this reduction in the growth forecast.
Among inflationary pressure and global competition, India’s service sector fell to its six-month low in September.
“The Indian economy has done well compared to other economies in South Asia, with relatively higher growth performance, rebound from sharp contraction during initial phase Covid,” said Hans Timmer, Chief Economist for South Asia, World Bank.