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The World Bank projected on Tuesday that the Indian economy will grow at a robust 6.6% in 2023–24 (FY24), which is a slowdown from the estimated 6.9% growth rate in 2022–23 (FY23). The World Bank cited “limited spillovers” to Asia’s third-largest economy from a projected global slowdown as the reason for this projection.
The Bank of International Settlements said in its report titled Global Economic Prospects that the global economy is “dangerously close” to entering a period of contraction, predicting that expansion would slow dramatically in 2023 and reach its third-slowest pace in nearly three decades.
It is possible that the global economy will enter a recession if other adverse shocks occur, such as greater inflation, even stricter policies, financial stress, deeper weakness in key economies, or escalating geopolitical tensions. “This would be the first time in more than 80 years that two global recessions have occurred within the same decade,” it said. “This would represent the first time that two global recessions have occurred within the same decade.”
The expansion of the world economy is anticipated to reach 1.7% in 2023, while the economies of the Euro Area and the United States are anticipated to expand at rates of 0% and 0.5%, respectively, throughout the course of the year.
As a result of the removal of economic limitations, pent-up consumer spending in China is expected to be released in 2023, which will cause the country’s growth rate to accelerate to 4.3%.
It is anticipated that China will have expanded at a rate of 2.7% in 2022, making it the slowest pace since the middle of the 1970s (with the exception of the pandemic year of 2020).
The World Bank predicted that a slowdown in the global economy as well as increased uncertainty would have a negative impact on the growth of exports and investments in India.
However, an increase in government spending on infrastructure and various business facilitation measures will attract private investment and assist the growth of industrial capacity. The pace of growth is anticipated to decelerate, dropping to 6.6 percent in FY23/24 before returning to its potential rate of somewhat more than 6 percent. It was also said that out of the seven main EMDEs (emerging markets and developing economies), it was anticipated that India would have the quickest economic growth.
In spite of this, the vast majority of analysts anticipate that India will either expand at a rate close to or below 6 percent in FY24, given the increasing global challenges.
According to the Bank, the shift toward more restrictive fiscal and monetary policies in several countries to address rising domestic and external imbalances and financing pressures is occurring at a time when growth is already slowing globally and output gaps are widening in several regional economies. This is because these countries are attempting to address rising domestic and external imbalances and financing pressures.
According to the report, “In India, it is expected that monetary and fiscal tightening over the forecast horizon will be less pronounced than in much of the rest of the (South Asia) region.” This is because adequate policy buffers have provided breathing room to support the ongoing recovery and boost public investment.
The multinational agency with its headquarters in Washington, DC, stated that India’s 9.7 percent GDP in the first half (April–September) of FY23 indicates a significant rise in private consumption as well as growth in fixed investment.
Recent projections made by India’s statistics agency indicate that the Indian economy will expand by 7% in FY23.
“Consumer inflation spent most of last year above the Reserve Bank’s upper tolerance limit of 6 percent, prompting the policy rate to be raised by 2.25 percentage points between May and December.” “India’s goods trade deficit has more than doubled since 2019 and was $24 billion in November, with deficits for crude petroleum and petroleum products ($7.6 billion) and other commodities (for example, ores and minerals at $4.2 billion) accounting for the widening,” it added.
According to the Bank, severe weather can also make it more difficult for many nations to put their macroeconomic plans into effect.
“For example, in India, more erratic monsoon rains have translated into more volatile food prices, destabilising households’ inflation expectations, undermining the ability to forecast inflation, and muddling the formulation of monetary policy,” it added.