World Bank Cuts India's GDP Growth Forecast for FY24 to 6.3%
The World Bank has cut India's GDP growth forecast for the fiscal year 2023-24 (FY24) to 6.3%, citing a shrinkage in consumption due to slower income. The current account deficit is projected to be 5.2% for 2024. These estimates were published in the India Development Update, the World Bank India’s biannual flagship publication.
World Bank Report Highlights India's Resilient Growth Despite Global Challenges
The report noted that India was one of the fastest-growing economies in the world, despite significant challenges in the global environment. The overall growth rate in India remains robust and is estimated to be 6.9% for the full year, with real GDP growing 7.7% year-on-year during the first three quarters of the fiscal year 2022/23.
The report also noted that strong domestic demand, underpinned by robust consumer spending by higher-income groups and higher public investment, was the main growth driver. However, consumer spending by low-income groups was weak due to slow income growth.
Current Account Deficit is Expected to be 5.2% for FY24.
According to the World Bank report, retail inflation in India is expected to moderate from 6.6% to 5.2% in FY24. The current account deficit is projected to be 5.2% for 2024. Rising borrowing costs and slower income growth will weigh on private consumption growth. Government consumption is projected to grow slower due to the withdrawal of pandemic-related fiscal support measures.
India's Growth Constrained by Slower Consumption and Challenging External Conditions
The Indian economy is expected to be constrained by slower consumption growth and challenging external conditions, according to the World Bank's annual publication. The report noted that rising borrowing costs and slower income growth would weigh on private consumption growth. Government consumption is projected to grow slower due to the withdrawal of pandemic-related fiscal support measures.
The report added that India needs to focus on deepening reforms to attract private investment, create jobs, and address structural bottlenecks in the economy to achieve sustainable and inclusive growth.
In conclusion, the World Bank's revised growth forecast for India is a cause for concern, given the country's ambitions to become a $5 trillion economy by 2025. However, the report also highlights India's resilience in the face of global challenges and the need for the government to focus on deepening reforms to ensure sustained and inclusive growth.