According to the World Bank’s important half-yearly report IDU (India Development Update) on the Indian economy, despite significant global challenges, India remained one of the fastest growing major economies with a growth rate of 7.2 percent during the financial year 2022-23.
India’s growth rate was the second highest among G20 countries, and almost twice the average of emerging economies. This achievement was achieved due to strong domestic demand, strong investment in public infrastructure and strengthening of the financial sector.
According to IDU, adverse conditions around the world will persist and may even increase due to high global interest rates, geopolitical tensions and sluggish global demand.
As a result, global economic growth is also set to slow in the medium term due to these combined factors.
So, in this context, the World Bank estimates that India’s gross domestic product (GDP) growth rate will be 6.3 percent during the financial year 2023-24.
This expected improvement was mainly due to challenging external conditions and the decline in demand growth.
However, service sector activities are expected to remain strong with a growth of 7.4 percent and investment growth is also expected to remain strong at 8.9 percent.
“The adverse global environment will continue to pose challenges in the short term… harnessing public spending to bring in more private investment will help India capitalize on global opportunities in the future. Favorable conditions will be created for growth, and even higher growth rates can be achieved…” says Auguste Tano Kouame, World Bank Country Director for India.
According to Dhruv Sharma, senior economist at the World Bank and lead author of the report, “Even though a rise in inflation may temporarily constrain consumption, we anticipate a recovery, and overall conditions will remain favorable for private investment. As the rebalancing of global value chains continues, the volume of foreign direct investment into India is also likely to increase…”
The World Bank expects that financial strength will continue in the financial year 2023-24 and the fiscal deficit of the central government is also expected to reduce, and it may come down from 6.4 percent of GDP to 5.9 percent.
Public debt is expected to stabilize at 83 percent of GDP. On the external front, the current account deficit is expected to reduce to 1.4 per cent of GDP.