Two multilateral institutions on Tuesday presented their regional economic outlook for this year, downgrading their projection for India’s growth prospects in 2023-24. The World Bank has cut its real GDP growth forecast for the country to 6.3% from the 6.6% it projected a few months back, and to 7% in October 2022. The key domestic factors earmarked for the downgrade are: rising borrowing costs will hurt otherwise resilient consumption demand, subdued government consumption, while services sector growth will slow over three years to an estimated 9.5% in 2022-23. The lower level will come down to 6.7%. The Manila-based Asian Development Bank (ADB) said a boom in domestic demand from China and India (which it believes are likely to remain healthy) will lift Asia’s growth prospects. However, it cut its 2023-24 GDP growth forecast for India to 6.4% from 7.2%, citing tighter monetary conditions and downplaying optimism on business conditions that it believed would hamper private investment. (which only one new post saw – COVID Recovery so far). In addition to these domestic issues, of course, both institutions cited the effects of current challenging conditions in the global economy, fueled by bank failures in the developed world and concerns about oil prices heading north despite a slow pace. are increasing again. Producers cut production in unison as world demand dropped.
To be clear, the government, which presented the Union Budget almost two months after previous forecasts of over 7% growth for these institutions, had not expressed such high expectations for this year. The Economic Survey pegs the growth rate for 2023-24 at 6.5%, while the Reserve Bank of India (RBI) estimates 6.4%. However, India’s current growth forecast for the last year is 7%, while the World Bank and ADB expect it to be lower at 6.9% and 6.8%, respectively. A better picture on the basis on which this year’s growth is to be calculated will emerge only by the end of May, when the first estimates for the last quarter of 2022-23 are released. The world will have turned a few more times by then and the forecasts for 2023-24 will be revised whichever way the wind blows. This time last April, the International Monetary Fund cut its India growth forecast to 8.2% from 9%, while the World Bank, ADB and RBI projected it to be 8%, 7.5%. % and 7.2% respectively. Policymakers can safely brush off the noise generated by these numbers, but must pay attention to signs of stress so that any impending damage can be actively mitigated.