Global growth is expected to slow sharply to 2.9% this year from 5.7% in 2021.
Global growth is expected to slow sharply to 2.9% this year from 5.7% in 2021.
The World Bank on Tuesday slashed India’s economic growth forecast for the current fiscal to 7.5% as rising inflation, supply chain disruptions and geopolitical tensions eased.
This is the second time that the World Bank has revised its GDP growth forecast for India in the current fiscal year 2022-23 (April 2022 to March 2023). In April, it lowered the forecast to 8% from 8.7% and has now been projected at 7.5%.
The GDP growth is in comparison to an expansion of 8.7% in the previous 2021-22 fiscal.
The World Bank said, “In India, growth is projected to slow to 7.5% in fiscal year 2022-23, due to rising inflation, supply chain disruptions and geopolitical spurts in recovery of services consumption from the pandemic.” With tensions,” the World Bank said in its latest issue of Global Economic Prospects.
It said growth will also be supported by certain investments made by the private sector and the government, which have introduced incentives and reforms to improve the business environment. The bank said the forecast reflects a 1.2 percentage point decline in growth from January’s estimate.
It said, “Growth is expected to slow to 7.1% in 2023-24.”
A rise in prices of all commodities from fuel to vegetables and cooking oil pushed wholesale price-based inflation to a record high of 15.08 per cent in April and retail inflation to an almost eight-year high of 7.79%.
High inflation prompted the Reserve Bank to hold an unscheduled meeting last month to raise the benchmark interest rate by 40 basis points to 4.40% and another hike is expected on Wednesday.
Before the World Bank action, global rating agencies also downgraded India’s economic growth forecast. Last month, Moody’s Investors Service cut its GDP estimate for calendar year 2022 from 9.1% to 8.8%, citing high inflation.
S&P Global Ratings also lowered India’s growth forecast for 2022-23 to 7.3% from 7.8%, on rising inflation and a higher-than-expected Russia-Ukraine conflict.
In March, Fitch lowered India’s growth forecast from 10.3% to 8.5%, while the IMF lowered the forecast from 9% to 8.2%.
The Asian Development Bank (ADB) pegged India’s growth at 7.5%, while the RBI in April cut the forecast to 7.2% from 7.8% amid volatile crude oil prices and supply chain disruptions due to the Russia-Ukraine war.
According to a World Bank report, growth in India slowed in the first half of 2022 as activity was disrupted due to a rise in COVID-19 cases, more targeted mobility restrictions and the war in Ukraine. Recovery is facing difficulties due to rising inflation.
The unemployment rate has fallen to levels seen before the pandemic, but labor force participation rates have remained below pre-pandemic levels and workers have moved to lower-paying jobs.
In India, the focus of government spending has shifted to infrastructure investment, labor regulations are being simplified, state-owned assets are being privatized, and the logistics sector is expected to be modernized and integrated. , said the bank.
World Bank President David Malpass said in the preface to the report that after several crises, long-term prosperity will depend on rapid growth and a return to a more stable, rules-based policy environment.
“There is good reason to expect that, once the war in Ukraine ceases, efforts will be made again to rebuild the Ukrainian economy and revive global growth – including the World Bank Group.” Global growth is expected to slow sharply to 2.9% this year from 5.7% in 2021. “It also reflects a nearly one-third cut over our January 2022 forecast of 4.1 percent this year,” he said.
“Rise in energy and food prices, along with supply and trade disruptions due to the war in Ukraine and necessary interest rate normalization, accounted for most of the downgrade,” Malpass said.