World Bank on India\'s Economy

New Delhi: Aided by investment and domestic demand, the World Bank on Tuesday said that the Indian economy is projected to grow at 6.3 per cent in the current financial year. “India continues to show resilience against the backdrop of a challenging global environment,” it said in its report.

As per the report by India Development Update of the World Bank, the growth of India, which accounts for the bulk of the South Asia region, is expected to remain robust at 6.3 per cent in 2023-24. On inflation, the report said, it is expected to decrease gradually as food prices normalise and government measures help increase the supply of key commodities.

The World Bank further said that South Asia is expected to grow 5.8 per cent this year — higher than any other developing country region in the world, but slower than its pre-pandemic pace and not fast enough to meet its development goals. “Relative to the spring forecast, growth in 2023 has been upgraded by 0.2 percentage points due to stronger-than-expected data in India,” it said.

“At a first glance, South Asia is a bright spot in the global economy. The World Bank is forecasting that the region will grow more quickly than any other developing country region over the next few years,” said Martin Raiser, vice president, South Asia Region of World Bank.

On monetary policy, the bank also said that the dampening effect of monetary policy tightening on domestic demand, particularly investment, will likely peak in the coming year. “The effects of slowing global demand and rising interest rates will be mitigated by India's low external debt and the healthy balance sheets of its financial and corporate sectors,” the bank said in its report.

The growth of merchandise exports, it said, is expected to slow as a result of weak foreign demand growth, although this will be offset by robust services exports. “In India, robust output growth in the first half of 2023 was supported by a strong expansion of investment and, on a sectoral level, continued strength of services,” it said, adding that the government infrastructure projects have supported momentum in the construction sector, which has grown at year-over-year rates of around 10 per cent in recent quarters.

“Export growth has benefited from strong exports of services, such as those related to information technology and consulting, which have been little affected by the slowdown in global growth. India’s services Purchasing Managers Index (PMI) reached 62.3 in August, nearly 10 points above the global index,” the bank said.