World Bank lowers India's growth projection to 6.5% in FY 2022-23

India’s economic growth for the financial year 2022-23 has been forecasted by various organisations and each quarter the growth forecast has been lowered by Reserve Bank of India, Asian Development Bank and now World Bank.

The World Bank on Thursday projected India’s growth rate to be 6.5 per cent against the RBI’s forecast of 7 per cent though the RBI too has been lowering the growth from 7.5 per cent to 7.2 per cent and now 7 per cent.

Also read: Fitch slashes India’s FY23 GDP growth forecast to 7% citing inflation levels

A 1 pc drop

The World Bank’s latest forecast for India is a drop by 1 per cent from its previous June 2022 projections. The Bank however said that India is recovering stronger than the rest of the world.

“The Indian economy has done well compared to the other countries in South Asia, with relatively strong growth performance… bounced back from the sharp contraction during the first phase of COVID,” said the World Bank in its forecast.

India has done relatively well with the advantage that it doesn’t have a large external debt, there are no problems coming from that side, and that there is prudent monetary policy, he observed. The Indian economy has done especially well in the services sector and especially service exports.

“But we have downgraded the forecast for the fiscal year that just started and that is largely because the international environment is deteriorating for India and for all countries. We see kind of an inflection point in the middle of this year, and first signs of slowing across the world,” said the Bank.

Weak Second half

The second half of the calendar year is weak in many countries and will be relatively weak also in India.

There are two main factors for lowering India’s growth. “One is the slowing of growth in the real economy of high-income countries and the other one is the global tightening of monetary policy that tightens financial markets and not just that it leads to capital outflows in many developing countries, but it also increases interest rates and uncertainty in developing countries which has a negative impact on investment,” said the Bank.

Also read: IMF slashes global growth rate for FY22, FY23; India’s rate down by 0.8%

“Despite India doing well, it is in tough weather. India has to navigate the higher commodity prices and there are more headwinds at the moment,” the Bank said.