The World Bank announced on Tuesday that it had lowered its estimate for India’s economic growth in the current fiscal year, which began on April 1, from 6.6% to 6.3%.
The third-largest economy in Asia saw year-on-year growth of 4.4% in October-December, down from 11.2% in the same period last year and 6.3% in the quarter before.
Since May, India’s central bank has increased interest rates by 250 basis points in an effort to control inflation.
“Rising borrowing costs and slower income growth will weigh on private consumption growth,” the World Bank said in a report. “Government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures.”
Growth for the previous fiscal year was pegged at 6.9% by the World Bank. On the strength of strong service exports and a declining merchandise trade deficit, it predicted that the current account deficit would decrease from an expected 3% of gross domestic product in the previous fiscal year to 2.1% of GDP for the current fiscal year.
Short-term investment flows to developing markets, including India, are at danger due to spillover from recent financial market instability in the US and Europe, according to World Bank economist Dhruv Sharma.
The RBI predicted that India’s economic growth would fall to 6.4% in FY24 from 7.0% in the previous fiscal, while the finance ministry’s Economic Survey predicted that economic growth would be 6.5% in the 2023–24 fiscal year beginning in April 2023.
Recently, S&P Global Ratings kept its prediction for India’s economic growth at 6% for the fiscal year beginning on April 1 before increasing it to 6.9% for the following year.
According to S&P’s quarterly economic update for Asia-Pacific, inflation will decline from 6.8% in the current fiscal year to 5% in 2023–2024. It predicted that India’s gross domestic product (GDP) will likely increase by 7% in the current fiscal year, which ends on March 31 (2022–23), before dropping to 6% in the following fiscal year, 2023–24. “India leads, with average growth of 7 per cent in 2024-2026,” it said.
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