World Bank retains India growth forecasts for FY24 and FY25

World Bank retains India growth forecasts for FY24 and FY25

The World Bank on Tuesday retained India’s economic growth forecast at 6.3% for the current financial year, and 6.4% for the next, citing slow post-pandemic recovery. “India is anticipated to maintain the fastest growth rate among the world’s largest economies, but its post-pandemic recovery is expected to slow, with estimated growth of 6.3% in FY2023/24,” the Bank said in its Global Economic Prospects report.

The multilateral agency has stuck to the growth estimate for India made it June, despite the National Statistical Office in its first advance estimates recently pegging the country’s real GDP expansion in the current fiscal year, at 7.3%.

The report noted that the slowdown in India growth to 7.2% in 2022-23 from 9.1% in 2021-22, was primarily due to a weakening post-pandemic rebound, particularly in private investment and consumption. However, a strong performance in 2023 was underpinned by robust public investment growth and vibrant services activity, thanks to resilient domestic demand for consumer services and exports of business services.

The Bank, however, warned that global growth in 2024 is set to slow for a third year in a row, in what could delay poverty reduction and exacerbate debt levels in many developing countries. Global GDP is likely to grow 2.4% in 2024, it said. That compares to 2.6% in 2023, 3% in 2022 and 6.2% in 2021 when there was a rebound as the pandemic ended.

That would make growth weaker in the 2020-2024 period than during the years surrounding the 2008-2009 global financial crisis, the late 1990s Asian financial crisis and downturns in the early 2000s, Reuters reported, quoting Ayhan Kose, World Bank Deputy Chief Economist.

Speaking about India, the latest World Bank report said, merchandise exports slowed, reflecting weak external demand. Headline consumer price inflation remained within monetary authorities’ target band of 2-6% throughout most of 2023, with policy rates being kept unchanged since February 2023, it said.

“Investment is envisaged to decelerate marginally but remain robust, supported by higher public investment and improved corporate balance sheets, including in the banking sector. Private consumption growth is likely to taper off, as the post-pandemic pent-up demand diminishes and persistent high food price inflation is likely to constrain spending, particularly among low income households,” the Bank said.

Meanwhile, government consumption is expected to grow slowly, in line with the central government’s efforts to lower the share of current spending, it said.

“Indian government revenues are expected to gain from solid corporate profits, and current expenditures are likely to decrease with the conclusion of pandemic-related measures,” it said. Interest payments are projected to be large in countries with elevated debt levels, including India, it added.