According to India Development Update(IDU) October 2023 released by World Bank(WB), India’s Gross Domestic Products (GDP) growth for the Financial Year 2023-24 (FY23/24) is retained at 6.3% and for FY24/25 the growth rate will be at 6.4%.
- India was one of the fastest-growing major economies in FY22/23 at the rate of 7.2%. India’s growth rate was the 2nd highest among G20 countries.
- The expected moderation is due to the challenging external conditions and reduced pent-up demand.
- However, service sector activity is projected to remain strong with growth of 7.4%, and investment growth is expected to stay robust at 8.9%.
About India Development Update(IDU):
i.The India Development Update (IDU) is a companion to the South Asia Development Update (SADU)
ii.IDU is a flagship biannual report of the World Bank on Indian economy.
- The report examines economic trends and prospects in the South Asia region and analyzes policy challenges faced by countries.
Factors Driving Resilience:
i.India is proving to be resilient in the face of global economic challenges.
- Several factors such as robust domestic demand, strong public infrastructure investment, and a strengthening financial sector are cited as key drivers of resilient .
ii.The Bank credit growth also increased (15.8% in the first quarter of FY23-24 compared with 13.3% in the first quarter of FY22-23) indicating a positive trend in the financial sector.
Challenges:
i.The report acknowledges that India faces challenges due to adverse global conditions like high global interest rates, geopolitical tensions, and sluggish global demand.
ii.As a result, global economic growth is also set to slow down over the medium term against a background of these combined factors.
Fiscal Outlook:
i.Fiscal consolidation is expected to continue in FY23/24, with the central government fiscal deficit projected to decline from 6.4% to 5.9% of GDP.
ii.Public debt is expected to stabilize at 83% of GDP.
iii.The current account deficit is expected to narrow to 1.4% of GDP, and it will be adequately financed by foreign investment flows and supported by large foreign reserves.
India’s Inflation Forecast to 5.9% for FY24
The report states that India’s headline inflation is expected to average 5.9% in FY23/24. IDU April 2023 projected India’s headline inflation to decline to an average of 5.2% in FY23/24.
- Bad weather has caused inflation to increase, with headline inflation reaching 7.8% in July 2023 due to higher food prices.
- However, inflation is expected to come down gradually as food prices normalize and the government takes steps to increase the supply of essential goods.
About SADU Oct 2023:
The October 2023 edition of the SADU, titled Toward Faster, Cleaner Growth, shows that South Asia is growing faster than any other developing country region in the world, but slower than its pre-pandemic pace.
- The report also includes short- and long-term policy recommendations for countries in the region to manage fiscal risks and accelerate growth, such as by boosting private sector investment and seizing opportunities created by the global energy transition.
Recent Related News:
As per the data released by the National Statistical Office (NSO), Ministry of Statistics and Program Implementation (MOSPI), India’s Gross Domestic Product (GDP) grew one year high to 7.8% in the April-June quarter of 2023-2024 (Q1FY24), compared to a growth of 6.1% in the January-March quarter of FY23 (Q4FY23).
About World Bank (WB):
President (WB Group)– Ajay Banga
Establishment – 1944
Headquarters – Washington D.C, United States (US)
Members – 189 member states
