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Citing deteriorating international environment, the World Bank in its latest report on ‘South Asia Economic Focus’ has downgraded India’s economic growth forecast to 6.5 per cent for the fiscal year 2022-23 (FY23), a drop of one per cent from its previous June 2022 projections. The Indian economy grew by 8.7 per cent in the previous year. However, it noted that India is recovering stronger than the rest of the world.

Hans Timmer, World Bank Chief Economist for South Asia said ‘The Indian economy has done well compared to the other countries in South Asia, with relatively strong growth performance... bounced back from the sharp contraction during the first phase of COVID’. He observed that India has done relatively well with the advantage that it doesn't have a large external debt, there are no problems coming from that side, and that there is prudent monetary policy. The Indian economy has done especially well in the services sector and especially service exports.

He further said ‘But we have downgraded the forecast for the fiscal year that just started and that is largely because the international environment is deteriorating for India and for all countries. We see kind of an inflection point in the middle of this year, and first signs of slowing across the world.’ He noted that the second half of the calendar year is weak in many countries and will be relatively weak also in India.

He said that's mainly because of two factors. One is the slowing of growth in the real economy of high-income countries. The other one is the global tightening of monetary policy that tightens financial markets and not just that it leads to capital outflows in many developing countries, but it also increases interest rates and uncertainty in developing countries which has a negative impact on investment.