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The World Bank in its latest ‘India Development Update’ (IDU) has slashed the country’s Gross Domestic Product (GDP) growth forecast to 6.3% against the earlier estimate of 6.6 per cent in 2023-24 (FY24). It said growth is likely to be constrained by slower consumption growth and challenging external conditions, it said, adding that government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures. The report said India was one of the fastest-growing economies in the world despite significant challenges remaining in the global environment.

Auguste Tano Kouame, World Bank’s Country Director in India, said ‘The Indian economy continues to show strong resilience to external shocks. Notwithstanding external pressures, India’s service exports have continued to increase, and the current-account deficit is narrowing’. The IDU said although headline inflation is elevated, it is projected to decline to an average of 5.2 per cent in 2023-24, amid easing global commodity prices and some moderation in domestic demand. It said ‘The Reserve Bank of India has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. India’s financial sector also remains strong, buoyed by improvements in asset quality and robust private-sector credit growth’.

With regard to inflation, the World Bank Report expects it to ease to 5.2 per cent, against 6.6 per cent in the current fiscal. It also said the central government is likely to meet its fiscal deficit target of 5.9 per cent of GDP in 2023-24 and combined with consolidation in state government deficits, and the general government deficit is also projected to decline. It said as a result, the debt-to-GDP ratio is projected to stabilize. On the external front, the current account deficit is projected to narrow to 2.1 per cent of GDP from an estimated 3 per cent in the current financial year on the back of robust service exports and a narrowing merchandise trade deficit.