AgenciesThe World Bank on Tuesday slashed India's economic growth forecast for FY23 to 7.5% as rising inflation, supply chain disruptions and geopolitical tensions taper recovery.
This is the second time the World Bank has revised its gross domestic product (GDP) growth forecast for India for 2022-23. In April, it cut the FY23 growth forecast for India to 8% from 8.7% estimated in January due to escalating uncertainties due to the Russia-Ukraine invasion. India's economy had grown 8.7% in FY22.
"In India, growth is forecast to edge down to 7.5% in the fiscal year 2022/23, with headwinds from rising inflation, supply chain disruptions, and geopolitical tensions offsetting buoyancy in the recovery of services consumption from the pandemic," the World Bank said in its latest issue of the Global Economic Prospects.
Growth will also be supported by fixed investment undertaken by the private sector and by the government, which has introduced incentives and reforms to improve the business climate. However, "Growth is expected to slow further to 7.1% in 2023-24 back towards its longer-run potential," it noted. The World Bank estimated slowing global growth at 2.9% this year from 5.7% in 2021.
Last month, Moody's Investors Service lowered calendar 2022 growth forecast for India to 8.8% from 9.1% citing the rise in crude oil, food and fertiliser prices weighing on household finances and spending.
While growth in India slowed in the first half of 2022 as activity was disrupted both by a surge in Covid-19 cases accompanied by more-targeted mobility restrictions and by the war in Ukraine, the recovery is facing headwinds from rising inflation, the bank said. Wholesale inflation in India surged more than expected to a record 15.08% in April, while retail inflation hit an eight-year high of 7.79%. The Reserve Bank of India is expected to raise repo rate by 25-50 bps on Wednesday amid rising inflation. Last month, it raised key lending rate by 40 bps in an out-of-cycle move.
The World Bank said the unemployment rate has declined to levels seen prior to the pandemic, but the labour force participation rate remains below pre-pandemic levels and workers have shifted to lower-paying jobs.
In India, focus of government spending has shifted toward infrastructure, labour regulations are being simplified, underperforming state-owned assets are being privatised, and the logistics sector is expected to be modernised and integrated, the bank said.
This is the second time the World Bank has revised its gross domestic product (GDP) growth forecast for India for 2022-23. In April, it cut the FY23 growth forecast for India to 8% from 8.7% estimated in January due to escalating uncertainties due to the Russia-Ukraine invasion. India's economy had grown 8.7% in FY22.
"In India, growth is forecast to edge down to 7.5% in the fiscal year 2022/23, with headwinds from rising inflation, supply chain disruptions, and geopolitical tensions offsetting buoyancy in the recovery of services consumption from the pandemic," the World Bank said in its latest issue of the Global Economic Prospects.
Growth will also be supported by fixed investment undertaken by the private sector and by the government, which has introduced incentives and reforms to improve the business climate. However, "Growth is expected to slow further to 7.1% in 2023-24 back towards its longer-run potential," it noted. The World Bank estimated slowing global growth at 2.9% this year from 5.7% in 2021.
Last month, Moody's Investors Service lowered calendar 2022 growth forecast for India to 8.8% from 9.1% citing the rise in crude oil, food and fertiliser prices weighing on household finances and spending.
While growth in India slowed in the first half of 2022 as activity was disrupted both by a surge in Covid-19 cases accompanied by more-targeted mobility restrictions and by the war in Ukraine, the recovery is facing headwinds from rising inflation, the bank said. Wholesale inflation in India surged more than expected to a record 15.08% in April, while retail inflation hit an eight-year high of 7.79%. The Reserve Bank of India is expected to raise repo rate by 25-50 bps on Wednesday amid rising inflation. Last month, it raised key lending rate by 40 bps in an out-of-cycle move.
The World Bank said the unemployment rate has declined to levels seen prior to the pandemic, but the labour force participation rate remains below pre-pandemic levels and workers have shifted to lower-paying jobs.
In India, focus of government spending has shifted toward infrastructure, labour regulations are being simplified, underperforming state-owned assets are being privatised, and the logistics sector is expected to be modernised and integrated, the bank said.
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