World Bank and Asian Development Bank have lowered India’s growth forecast for the fiscal year 2023-24. In its latest India Development Update, the World Bank has cut India’s GDP growth forecast to 6.3% for the current fiscal from 6.6% that it had estimated in December 2022. On the other side, the Asian Development Bank slashed India’s growth forecast to 6.4% for the fiscal year 2023-24 from its previous estimate of 7.2%.
The World Bank said: “Growth is expected to be constrained by slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures. India’s retail inflation would decline to an average of 5.2% in the current fiscal from 6.6% last fiscal as global commodity prices ease and there is some moderation in domestic demand.”
The Indian economy is estimated to have grown by 7% in the fiscal 2022-23 and the Economic Survey had projected a baseline GDP growth of 6.5% in real terms in FY24 with a range of 6-6.8%. In February, the RBI had pegged GDP growth at 6.4% for the fiscal and CPI inflation at 5.3%.
Asian Development Outlook, April 2023 listed the causes for the cut in growth forecast as expected global economic slowdown, tight monetary conditions, and persistently elevated oil prices. GDP growth is likely to recover to 6.7% in fiscal 2024-25, driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem. The agency has pegged GDP growth at 6.8% for 2022-23.
According to ADB, inflation will likely moderate to 5% in the current fiscal, assuming moderation in oil and food prices, and slow further to 4.5% in 2024-25 as inflationary pressures subside. In tandem, monetary policy in the current fiscal is expected to be tighter as core inflation persists, while becoming more accommodative in 2024-25.
The forecasts by the two agencies coincide with the ongoing meeting of the MPC. The RBI on April 6 is widely expected to raise the repo rate by another 25 basis points to 6.75% to cool persistently high retail inflation and will also come out with its growth and inflation forecasts for the fiscal. The International Monetary Fund is also scheduled to come out with the World Economic Outlook soon.
