“Spillovers from recent developments in financial markets in the US and Europe pose a risk to short-term investment flows to emerging markets, including India. But Indian banks remain well capitalised,” said Dhruv Sharma, Senior Economist, World Bank, and lead author of the report. Despite the external challenges to growth, India jiogigatv.co.in was one of the fastest growing economies in the world, the World Bank said. Though there were some signs of moderation in the second half of FY23, growth was underpinned by strong investment activity bolstered by the government’s capex push and buoyant private consumption, particularly among higher income earners, it said.
The RBI is expected to hike the benchmark interest rate by 25 basis points in the bi-monthly monetary policy to be announced on April 6 as it is trying to bring down retail inflation and keep pace with global peers. Last month, most central banks, the US Federal Reserve, the European Central Bank and Bank of England, hiked their interest rates in a bid to tame inflation in their economies. India’s GDP growth is expected to be resilient despite some moderation in the second half of the last fiscal, the World Bank said in its latest report on Tuesday.
In its Global Global Economic Prospects report, World Bank explained that the slowdown is attributed to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation. In general, the situation in India is better than in many of the other countries in South Asia, he noted. The situation in the financial sector is healthier than seen in many of the other countries. Observing that the banks in India are in good shape and they have improved after the pandemic, Timmer said that there is healthy credit supply in the economy and private investment is relatively strong compared to recent years. “The Reserve Bank of India has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. India’s financial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth,” it said. New Delhi/Washington, Apr 4 The World Bank and the Asian Development Bank on Tuesday projected moderation in the Indian economic growth between 6.3 per cent and 6.4 per cent due to a slowdown in consumption and challenging external conditions.
India’s headline consumer price inflation has returned to within the central bank’s 2-6 per cent tolerance band,” it added. In view of the global challenges, the World Bank has projected India’s FY24 GDP growth to slow to 6.6 per cent before “falling back toward its potential rate of just above six per cent”. It cautions about trade-offs between trying to limit the adverse impact of global spillovers on growth and the available policy space.
India remained resilient despite challenging global economic conditions, says World Bank
As a result of continued efforts by the Government, India has improved its rank by 53 positions in last two years and 65positions in last four years. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com. Separately, HSBC’s Pranjul Bhandari told the Indian Express that investment expenditures have grown slightly better, but most of this expenditure is just to replace the old investment, and not to create fresh ones. “This reflects synchronous policy tightening aimed at containing very high inflation, worsening financial conditions, and continued disruptions from the Russian Federation’s invasion of Ukraine,” it said. Is forecasting a sharp, long-lasting slowdown, with global growth declining to 1.7% in 2023 from the 3% expected just six months ago, Reuters reported.
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The report further said that India’s retail inflation will see a moderation from 6.6 per cent to 5.2 per cent in FY , adding that its Current Account Deficit is expected to be at 5.2 per cent in FY24. To tame inflation, India’s central bank has raised interest rates by 250 basis points since May. Asia’s third-largest economy recorded year-on-year growth of 4.4 per cent in October-December, down from 11.2 per cent a year back and 6.3 per cent in the preceding quarter. All countries in the region except Bhutan have downgraded their forecasts, the World Bank said in its report.
World Bank slashes India’s GDP growth forecast to 6.3%
The growth rate is expected to moderate to 6.3 per cent in FY24 due to shrinkage in consumption on the back of slower income, the report, The India Development Update, highlighted. The World Bank’s latest update on India’s growth estimates acknowledges the many uncertainties facing the world economy. Domestically too, it sees the lingering impact of the pandemic on lower income groups, and the withdrawal of fiscal support by the government, as reasons for a slowing down of consumption demand.
With regard to inflation, the World Bank Report expects it to ease to 5.2 per cent, against 6.6 per cent in the current fiscal. The update, however, notes that although significant challenges remain in the global environment, India was one of the fastest growing economies in the world. Get live Share Market updates and latest India News and business news on Financial Express. The World Bank also noted that net portfolio investment flows from equity markets remained positive in Q3 FY21/22 as the RBI hiked the policy rate and the growth differential widened vis-à-vis the US.
“Despite the sizeable increase in the nominal policy interest rate, the real interest rate has only increased to just over 0 percent and remains below the 1-1.5 percent level that the RBI considers to be the neutral rate,” it said. IndiGo has placed an order for 500 Airbus A320 family of aircraft, worth $50 billion at list price and the largest in the history of global aviation. On India, the World Bank noted that manufacturing has rebounded into 2023 after contracting in the second half of 2022, and investment growth remained buoyant as the government ramped up capital expenditure. «The surest way to reduce poverty and spread prosperity is through employment-and slower growth makes job creation a lot harder,» said Ajay Banga, the newly-appointed World Bank Group President. In January, the World Bank had warned that global GDP was slowing to the brink of recession, but since then, strength in the labor market and consumption in the U.S. had exceeded expectations as has China’s recovery from COVID-19 lockdowns. There is also no sign that the informal sector is becoming more productive or becoming smaller. So, there is still a huge structural agenda in India to make growth more inclusive to increase participation,» he said.