World Bank revises upwards India's GDP growth forecast

Nation's economy grew at 6.3% in Sept quarter compared to 13.5% in preceding June quarter

New Delhi: The World Bank on Tuesday revised upwards its GDP growth forecast for India to 6.9 per cent for 2022- 23, saying the economy was showing higher resilience to global shocks. In its India Development Update, the World Bank said the revision was due to higher resilience of the Indian economy to global shocks and better-than-expected second quarter numbers.

India's economy grew at 6.3 per cent in September quarter 2022-23 as compared to 13.5 per cent in the preceding June quarter, mainly on account of contraction in output of manufacturing and mining sectors. This is the first upgrade of India's growth forecast by any international agency amid the global turmoil. In October, the World Bank had cut India's GDP growth forecast to 6.5 per cent from 7.5 per cent earlier.

Now, it has upgraded the projection to 6.9 per cent for 2022-23 (April 2022 -March 2023). The report titled 'Navigating the Storm', said while the deteriorating external environment will weigh on India's growth prospects, the economy is relatively well positioned to weather global spillovers compared to most other emerging markets.

Impact of a tightening global monetary policy cycle, slowing global growth and elevated commodity prices will mean that the Indian economy will experience lower growth in 2022-23 compared to 2021-22 (8.7 per cent), it said. Despite these challenges, it said, the update expects India to register a strong GDP growth and remain one of the fastest growing major economies in the world, due to a robust domestic demand.

"The World Bank has revised its 2022-23 GDP forecast upward to 6.9 per cent from 6.5 per cent (in October 2022), considering a strong outturn in India in second quarter (July-September) of 2022-23 financial year," the India Development Update said.

"India's economy has been remarkably resilient to the deteriorating external environment, and strong macroeconomic fundamentals have placed it in good stead compared to other emerging market economies," World Bank's Country Director in India Auguste Tano Kouame told reporters here.

However, he said, continued vigilance is required as adverse global developments persist. The report projected that the Indian economy will grow at slightly lower rate of 6.6 per cent in 2023-24. "A challenging external environment will affect India's economic outlook through different channels... rapid monetary policy tightening in advanced economies has already resulted in large portfolio outflows and depreciation of the Indian rupee while high global commodity prices have led to a widening of the current account deficit," it said.

The report said India's economy is insulated from global spillovers compared to other emerging markets because India has a large domestic market. The country remains affected by spillovers from the US, Euro area and China.

The report finds while 1 percentage point decline in growth in the US is associated with a 0.4 percentage point fall in India's growth, the effect is 1.5 times larger for other emerging economies.