Global recession 'perilously close', but Indian economy to grow at 6.6% in FY24, says World Bank

New Delhi: Indian economy will grow at a robust 6.6 per in FY24, or fiscal year 2023-24, the World Bank said, even as it projected a gloomy outlook for the global economy.

India’s growth is “projected to slow, to 6.6 per cent in FY 2023-24 before falling back toward its potential rate of just above 6 per cent”, the World Bank said, citing “limited spillover” to Asia’s third-largest economy from a projected global slowdown.

In December last year, the World Bank had projected India’s FY 2022-23 growth at 6.4 per cent.

The World Bank said that the slowdown in the global economy and rising uncertainty would weigh on exports and investment growth in India.

India to be fastest-growing economy EMDEs

The World Bank has projected India to be the fastest-growing economy of the seven largest EMDEs (emerging market and developing economies).

“Governments increasing infrastructure spending and various business facilitation measures, however, will crowd in private investment and support the expansion of manufacturing capacity,” it said.

The World Bank, however, said consumer inflation spent most last year was above the Reserve Bank of India’s (RBI) upper tolerance limit of 6 per cent, prompting the policy rate to be raised by 2.25 percentage points between May and December.

“India’s goods trade deficit has more than doubled since 2019, and was $24 billion in November, with deficits for crude petroleum and petroleum products ($7.6 billion) and other commodities (for example, ores and minerals at $4.2 billion) accounting for the widening,” it added.

Recession warning

In its ‘Global Economic Prospects’ report, the World Bank warned that the global economy will come “perilously close” to a recession this year, led by weaker growth in all the world’s top economies – the United States, Europe and China.

“Further negative shocks — such as higher inflation, even tighter policy, financial stress, deeper weakness in major economies, or rising geopolitical tensions — could push the global economy into recession. This would mark the first time in more than 80 years that two global recessions have occurred within the same decade,” the World Bank warned.

In 2023, the global economy is projected to grow by 1.7 per cent, while the Euro Area and the US are expected to grow at zero per cent and 0.5 per cent respectively.

However, China’s growth has been projected to increase to 4.3 per cent in 2023 as the lifting of Covid-19 restrictions is the country could possibly give rise to consumer spending.

In 2022, China is expected to have grown at 2.7 per cent in 2022 — the weakest pace since the mid-1970s, except the pandemic year of 2020.

The World Bank also said that the rising interest rates in developed economies including the United States and Europe will attract investment capital from poorer countries, thereby depriving them of crucial domestic investment. At the same time, those high interest rates will slow growth in developed countries at a time when Russia’s invasion of Ukraine has kept world food prices soaring.

With inputs from agencies

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