World Bank Upgrades India’s GDP Growth Forecast From 6.5% To 6.9%

The World Bank has upgraded India’s growth prediction from 6.5% to 6.9% on the basis of its September quarter performance that saw 6.3% growth in its GDP.

After taking into account “a robust outturn” in the 2nd quarter of the current fiscal year, the World Bank increased India’s GDP growth forecast for 2022–23 from 6.5% to 6.9% on Tuesday. According to it, India is “well positioned” to face global headwinds.

The World Bank revised its growth forecast for India in its Navigating the Storm report based on the country’s September quarter performance, which was “led by strong private investment and consumption and resulted in a 6.3% increase in GDP.

In the first half of FY 22/23, the government’s emphasis on increasing capital investment helped domestic demand. 

India also passed the UK to become the world’s fifth-largest economy, according to the global bank. At the beginning of Q3 FY 22/23, “High frequency indicators imply continued solid growth of domestic demand.” India saw 1.5% growth in 2022–2023.

Even though big economies’ growth projections have been sharply lowered, this is the first report from any international organization to upgrade India’s economic performance.

According to Auguste Tano Kouame, the World Bank’s India country director, “India’s economy has been impressively robust to the weakening external environment, and robust macroeconomic fundamentals have positioned it in excellent footing compared to other emerging market nations.” 

But given the persistence of unfavorable global circumstances, ongoing vigilance is necessary.

According to the report, the Indian economy will expand by 6.6% in the upcoming fiscal year (2023–2024), down from its earlier prediction of 7%. India’s GDP growth was predicted by the International Monetary Fund to be 6.8% and 6.1%, respectively, in its October edition of the World Economic Outlook.

India needs to expand at a rate of 8% or higher to reach its goal of becoming a developed nation by 2047 because, despite being a very high growth rate, “6.6% is not enough,” according to Kouame. 

He named the production-linked incentive plan as one of the driving forces for the growth of India as a supply chain center.

India’s 7% growth in FY23 appears more believable. Given that growth has already reached 9.7% in 1HFY23, this optimistic prediction is attainable. 

This suggests that the average increase needed for the 2HFY23 is only 4.6%, which seems very doable, according to DK Srivastava, the principal policy advisor at the firm EY India.

According to the World Bank, rapid monetary policy adjustment in advanced economies has caused significant portfolio outflows and rupee devaluation, while rising global commodity prices have widened the current account deficit. 

Due in part to its “huge local market” and being “somewhat less exposed” to global trade flows, India’s economy is “largely insulated” from these challenges.

Despite this, India is not totally insulated from the world economic crisis. According to the analysis, a fall in US growth of one percentage point is accompanied by a decline in India’s growth of 0.4 percentage points. 

For other emerging economies, the effect is around 1.5 times bigger, it claimed. Similar findings are obtained from analyses of growth spillovers from both China and the European Union, it was said.

According to the World Bank research, India’s economy is resilient due to regulatory reforms and wise policy changes.