The World Bank cut its FY23 economic growth forecast for India to 7.5 percent from 8 percent in April, citing rising inflation, supply chain bottlenecks, and geopolitical tensions.
According to the World Bank’s latest Global Economic Prospects report, the country’s growth rate will slow to 7.5 percent in fiscal year 2022/23, with headwinds from inflation, supply chain disruptions, and geopolitical tensions offsetting buoyancy in the recovery of services consumption post the pandemic era.
The World Bank has updated its GDP growth prediction for India for the second time in the current fiscal year (April 2022 to March 2023).
Earlier in April, it reduced its projection from 8.7 percent to 8 percent, and it is currently expected to be 7.5 percent. The GDP expansion compares to an 8.7 percent expansion in the prior fiscal year 2021-22.
According to the World Bank, fixed investment by the private sector and the government, which has adopted incentives and reforms to improve the business climate, would assist India’s economic growth.
This prognosis marks a 1.2 percentage point decrease in growth from the January projection. Growth is predicted to decline even more to 7.1 percent in 2023-24, returning to its long-run potential.
The prolonged Ukraine crisis and a weak rupee pushed up energy and raw material costs, heightening risks for enterprises that can’t pass on costs.
Annual wholesale price inflation, a proxy for producer prices, rose to 15.08 percent in April, remaining in the double digits for the 13th consecutive month.
According to market data, wholesale prices are at their highest level since mid-2005. According to a previous series, WPI inflation in April was the highest since 1991, according to economists.
They predicted that, with wholesale inflation rising alongside retail inflation to 7.79 percent in April, an eight-year high, the RBI will push for aggressive rate hikes to cool prices. Higher interest rates will also slow economic development, according to analysts.
The central bank held an emergency meeting in May to raise the benchmark interest rate by 40 basis points to 4.40 percent, and another hike is planned tomorrow.
To keep prices under control, India recently reduced excise duty on gas and diesel and waived import duties on several raw materials used in the steel and plastic industries. The export tariff on iron ore and iron pellets was raised as well.