New Delhi, October 03: The World Bank has released its latest India Development Update (IDU), forecasting India’s GDP growth rate to be 6.3% for the financial year 2023-2024, despite facing increasing global economic headwinds.
In its report, the World Bank highlighted the resilience of India’s economy, noting that service sector activity is expected to lead the growth with a projected 7.4% expansion, while investments are set to remain robust at 8.9%.
India’s economic performance in the previous fiscal year (2022-2023) was impressive, with a growth rate of 7.2%, making it one of the fastest-growing major economies globally. This resilience was attributed to strong domestic demand, substantial public infrastructure investment, and a strengthening financial sector.
Bank credit growth has also shown positive signs, increasing to 15.8% in the first quarter of FY23/24, compared to 13.3% in the previous fiscal year.
Auguste Tano Kouame, the World Bank’s Country Director in India, acknowledged the short-term challenges posed by the global economic environment. He stressed the importance of public spending to encourage private investments and create favorable conditions for India to capitalize on global opportunities.
The report explained the recent inflation spike in India as a result of adverse weather conditions, which led to a 7.8% increase in headline inflation in July. However, it anticipates a gradual decrease in inflation as food prices stabilize and government measures boost the supply of essential commodities, thus supporting continued private investment.
Dhruv Sharma, Senior Economist at the World Bank, anticipates increased foreign direct investment in India as the global value chain continues to rebalance.
The report also expects fiscal consolidation to persist in FY23/24, with the central government fiscal deficit projected to decrease from 6.4% to 5.9% of GDP. Public debt is expected to stabilize at 83% of GDP, while the current account deficit is set to narrow to 1.4% of GDP, supported by foreign investment flows and substantial foreign reserves.
India’s economy showcases remarkable resilience and growth potential in the face of ongoing global challenges. Strategic fiscal measures are poised to further enhance India’s position in the global economic landscape.
