India’s growth resilient despite global challenges

The World Bank on Tuesday retained India's growth forecast at 6.3 per cent for current financial year on the back of robust services activities despite global headwinds.

According to a World Bank report released on Tuesday, India continues to show resilience against the backdrop of a challenging global environment.

In India, which accounts for the bulk of South Asia region, growth is expected to remain robust at 6.3 per cent in 2023-24, India Development Update of the World Bank said.

The World Bank had projected 6.3 per cent GDP growth in its April report as well. India recorded 7.2 per cent growth in 2022-23.

Last month, Asian Development Bank (ADB) marginally lowered India's growth forecast to 6.3 per cent for current financial year.

As per RBI's latest forecast, the Indian economy would grow at 6.5 per cent in 2023-24.

The Organisation for Economic Cooperation and Development (OECD) in its latest report upped the GDP growth projection for India to 6.3 per cent from the previous estimate of 6 per cent. While global rating agency Fitch retained India's growth forecast at 6.3 per cent, S&P Global Market Intelligence raised it to 6.6 per cent from the earlier projection of 5.9 per cent.

Sharing sectoral growth projections, the World Bank report said, the agriculture sector is expected to clock a growth of 3.5 per cent, industry 5.7 per cent and services 7.4 per cent during 2023-24. At the same time, investment growth is projected to remain robust at 8.9 per cent.

“An adverse global environment will continue to pose challenges in the short term. Tapping public spending that crowds in more private investments will create more favourable conditions for India to seize global opportunities in the future and thus achieve higher growth,” said Auguste Tano Kouame, World Bank’s Country Director in India.

On inflation, the report said, it is expected to decrease gradually as food prices normalize and government measures help increase the supply of key commodities. Retail inflation is expected to remain elevated at 5.9 per cent during the year, it said. The World Bank expects fiscal consolidation to continue in FY24 with the central government’s fiscal deficit projected to decline from 6.4 per cent to 5.9 per cent of GDP.

“Public debt is expected to stabilize at 83 per cent of GDP. On the external front, the current account deficit is expected to narrow to 1.4 per cent of GDP, and it will be adequately financed by foreign investment flows and supported by large foreign reserves,” it said. The report also said the asset quality of scheduled commercial banks (SCBs) continue to improve, driven by higher loan growth, decline in slippages, better recoveries and write-offs of bad loans.

Gross non-performing assets of SCBs as a ratio of gross advances reached its lowest level in a decade to 3.9 per cent as of March 2023 compared to 5.9 per cent in March 2022, it said.