World Bank upgrades India GDP growth to 6.9% for FY23, says it has higher resilience to global shocks

World Bank upgrades India GDP growth to 6.9% for FY23, says it has higher resilience to global shocks
Representative imageCanva
  • The Indian economy is showing higher resilience to global shocks, World Bank said in its India development update.

  • The World Bank’s FY23 GDP growth forecast at 6.9% is lower than that of most institutions like RBI and agencies like Moody’s, S&P, CRISIL and SBI Ecowrap – all of which expect the Indian economy to expand by 7% in FY23.

  • As the effects of post-Covid reopening fades, India’s growth momentum will slow down, said Goldman Sachs.
The World Bank on Tuesday revised upwards its GDP growth forecast for India to 6.9% for 2022-23, saying the economy was showing higher resilience to global shocks.

In October, it had cut India's GDP growth forecast to 6.5% from 7.5% earlier. In its India Development Update, the World Bank said the revision was due to higher resilience of the Indian economy to global shocks and better-than-expected second quarter numbers.

India's gross domestic product (GDP), which grew 8.7% in the previous 2021-22 financial year, expanded 6.3% in July-September 2022-23.

The country however remains affected by spillovers from the US, Euro area and China.

The World Bank saw the government meeting the fiscal deficit target of 6.4% of the GDP in 2022-23. It expected inflation to be 7.1% in the current fiscal year.


Lower than RBI and other agency expectations

The World Bank is one of the rare institutions that has upgraded India’s GDP growth, as opposed to the multiple downgrades seen in the last few weeks. However, its FY23 projections are lower than what most agencies expect, including India’s central bank, RBI – which sees the economy growing at 7% for the current financial year.

In the second week of November, Moody’s too cut its India GDP growth forecast for 2022 to 7% from its earlier estimates of 7.7%. On November 27, rating agency Standard & Poor’s lowered its India GDP forecast to 7% for FY23 from 7.3% it had estimated earlier. CRISIL estimates mirror S&P’s – as it lowered from 7.3% to 7% – but over a week ahead of S&P.

Agencies have been differing in their projections of quarterly GDP growth, with diverse commentaries. “The pandemic had significantly impacted expenditure patterns under individual consumption expenditure components like health and education and it is now mean reverting. These types of anomalies are making it difficult to predict the GDP growth on a consistent basis,” said SBI Ecowrap on November 30, after Q2 GDP numbers were announced. The agency, like most others, believes that India is on course to achieve 7% GDP growth in FY23.

A few agencies also predict that there is more pain for the economy ahead. CRISIL expects FY24 growth to slow down further to 6%. So does Goldman Sachs which also recently slashed its growth projections for the calendar year 2023 to 5.9%, as it believes 2022 to grow at 6.9%.

“India’s growth momentum will be affected by the fading effects of post-Covid reopening, coupled with higher borrowing costs,” as per Goldman Sachs.

The RBI raised base interest rates four times to an aggregate 1.9% since May this year. The base rate now stands at 5.9% – a three year high. The RBI’s monetary policy committee (MPC) meeting is currently in progress, and is expected to end on December 7, when a possible rate hike could be announced, as per experts.

(With inputs from PTI)


End of revenge spending? Urban spending to taper off in the next few quarters, says Motilal Oswal

Inflation burns a hole in the pockets of India’s lower income households. From FMCG goods, flip flops to crackers, consumption takes a backseat