World Bank Downgrades India’s FY23 GDP Growth Forecast to 6.5%

The World Bank has slashed India’s gross domestic product (GDP) growth forecast for financial year 2022-23 to 6.5%. Earlier it had stood at an estimate of 7.5%. The World Bank’s action is amid widespread fears of recession f in major advanced economies. The lowering of India’s growth estimate by the World Bank has come close on the heels of the Reserve Bank of India (RBI) also slashing its forecast for the current financial year to 7% from 7.2% earlier.

The World Bank report further noted that private investment growth is likely to be dampened by heightened uncertainty and higher financing costs.

India’s economic outlook will continue to be affected by some major global issues like spillovers from the Russia-Ukraine war and global monetary policy tightening, the international financial organization warned. In its twice-a-year report on South Asia, the World Bank said, “Private investment growth is likely to be dampened by heightened uncertainty and higher financing costs.”

The international financial institution also noted that slowing global demand will impact the country’s exports. This is the third time the World Bank has revised its GDP growth forecast for India in FY23. In June, it had slashed its FY23 GDP growth forecast for India to 7.5%. Earlier in April, it had trimmed the forecast from 8.7% to 8%.

In the latest update, the global financial institution explained: “The spillovers from the Russia-Ukraine war and global monetary policy tightening will continue to weigh on India’s economic outlook: elevated inflation on the back of higher prices of key commodities and rising borrowing costs will affect domestic demand, particularly private consumption in FY2023/24, while slowing global growth will inhibit growth in demand for India’s exports”.

India’s apex bank, The Reserve Bank of India (RBI) has recently cut the economic growth projection for the current fiscal to 7% from 7.2% estimated earlier on account of extended geopolitical tensions and aggressive monetary policy tightening globally. The RBI in April had cut GDP growth estimate to 7.2% from its earlier forecast of 7.8%.

Real GDP grew 13.5% in the first quarter of FY’23, surpassing the pre-pandemic level by 3.8%. This was led by robust growth in private consumption and investment demand.