World Bank revises India's GDP growth forecast for FY23 upwards to 6.9%

7 Dec 2022 , 08:45 AM

The World Bank on Tuesday increased upwards its GDP growth prediction from 6.5% for India to 6.9% for 2022-23, saying the country was exhibiting stronger resilience to global shocks.

The World Bank stated in its most recent India Development Update that the modification was brought about by better-than-expected second-quarter results and the Indian economy’s increased resilience to global shocks.

This is welcome news because the World Bank had been downgrading India’s growth projection for FY23 in its World Economic Outlook report for the past three reports.

It had decreased its projection of India’s GDP from 7.5% in June to 6.5% in October, citing the effects of the protracted conflict in Ukraine, rising international interest rates, and high inflation.

India’s GDP expanded by 6.3% in the third quarter of 2022—2023 compared to 13.5% in the second quarter, mostly because the manufacturing and mining industries’ output shrank.

In the midst of turbulence throughout the world, this is the first revision to any international agency’s growth forecast for India.

The Indian economy would grow less in 2022—23 than it did in 2021—22 due to current global issues such as a tighter monetary policy cycle, slowing GDP, and high commodity prices.

It reaffirmed, however, that due to strong domestic demand, India will continue to increase its GDP quickly and rank among the world’s fastest-growing major economies despite these obstacles.

The Indian economy is comparatively more protected from global spillovers than other emerging countries, according to the report “Navigating the Storm.”

Private spending and investment increased significantly in October, according to high-frequency data.

Both electricity production and freight movement were consistently higher than before the outbreak. The sales of passenger cars and air passenger traffic both increased significantly (albeit still below pre-pandemic levels).

After experiencing a decline in the early days of the Russia-Ukraine crisis, both the Sensex and the Nifty have since recovered thanks to corporate results that exceeded expectations in the first quarter of FY22-23, a slowdown in domestic inflation, and rising commodity prices worldwide.

Despite significant inflation and high borrowing costs, the report highlighted that private consumption and investment both increased significantly.

Spending throughout the holiday season in September helped to fuel this strong increase in private consumption.

According to the World Bank research, the services sector grew 9.3% year over year in Q2 of FY23 as opposed to 10.5% in Q2 of FY23, driven by strong growth in business services and contact-intensive areas of the retail, transportation, hotel and restaurant, and public administration industries.

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