India's GDP to grow at 6.9% in FY23 & will remain one of the fastest-growing major economies, says World Bank

India's GDP to grow at 6.9% in FY23 & will remain one of the fastest-growing major economies, says World Bank
By: Economic Times Posted On: December 06, 2022 View: 96

The World Bank in its India Development Update has upgraded the forecast for the Indian economy to 6.9% from 6.5% earlier in the current fiscal year, news agency Reuters cited a World Bank report as saying on Tuesday. The report cited tightening monetary policy and high commodity prices as factors impacting the country's growth.

The report sees average retail inflation at 7.1 this year. World Bank's India Development Update said India is affected by spillovers from the US, Euro area and China.

It however saw the government meeting the fiscal deficit target of 6.4 per cent of the GDP in 2022-23.

World Bank expects India's GDP growth to slow down to 6.9% in the ongoing fiscal as compared to 8.7% in FY 21-22. India is projected to be one of the fastest-growing major economies. Slowdown in emerging economies could also position India as an attractive alternate investment destination, it said. Consumer price index (CPI) based retail inflation, which the RBI mainly factors in while arriving at its monetary policy, is showing signs of moderation but still remains above the central bank's upper tolerance level of 6 per cent since January this year.

The inflation dropped to 6.77 per cent in October from 7.41 per cent in the preceding month, mainly due to easing prices in the food basket, though it remained above Reserve Bank's comfort level for the 10th month in a row.

The GDP growth in the second quarter of the fiscal slowed to 6.3 per cent as against a growth of 13.5 per cent in the preceding three months.

The RBI's three-day monetary policy committee meeting commenced on Monday. "The RBI will be presenting the monetary policy against the backdrop of GDP growth slowing down as well as inflation being high above 6 per cent. We do believe that the MPC will continue with rate hikes this time though the magnitude will be lower - probably 25-35 bps," said Madan Sabnavis, Chief Economist at Bank of Baroda.

Shaktikanta Das has ruled out a recession for India, while key government officials including the finance minister have said India remains a bright spot amid the global headwinds.

However, from foreign brokerages to rating agencies, most of them have in recent days slashed India’s economic growth forecasts. The expected slowdowns in Europe and North America, along with China's sluggish economy are likely to hurt growth, while Russia’s attack on Ukraine lingers.

Geopolitical uncertainty, synchronized monetary tightening and high energy prices are clearly weighing on global growth in the first quarter of 2023, SBI said. India's gross domestic product (GDP) growth for the July-September quarter slowed to 6.3% from 8.4% a year earlier, and 13.5% in the previous quarter, owing to slower growth of the manufacturing and mining sectors.

Nomura economists Sonal Varma and Aurodeep Nandi said in a report that they believe India's growth rate cycle has peaked and a broad-based slowdown is underway.

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