On June 6, 2023, the World Bank (WB) in its Global Economic Prospects Report-June 2023 lowered India’s growth outlook to 6.3% for 2023, a 0.3 percentage point downward revision from 6.6% in January 2023. However, India will remain the fastest-growing economy (in terms of both aggregate and per capita GDP) of the largest EMDEs (Emerging Market and Developing Economies).
- India’s growth to pick up slightly through FY2025/26 as inflation moves back toward the midpoint of the tolerance range and reforms payoff.
- For 2024, WB expects GDP growth rate at 6.4%. While for 2025 forecast, the growth rate is expected at 6.5%.
Reason behind the slowdown:
Slowdown is attributed to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation.
Key Points w.r.t. India:
i.The growth forecast for India in 2023-24 has been revised downward by the WB, citing a decline in private consumption and a significant global slowdown.
ii.The manufacturing sector experienced a rebound throughout 2023, following a contraction in the second half of 2022.
iii.Investment growth remained strong as the government increased capital expenditure.
iv.In terms of employment, the first quarter of 2023 saw a decrease in unemployment rate to 6.8%, the lowest since the beginning of the COVID-19 pandemic. There was an increase in labor force participation.
v.India’s headline consumer price inflation has returned to a range of 2-6 percent, which falls within the central bank’s tolerance band.
The Global Story:
i.The global economy is projected to “slow substantially” this year, with a “pronounced deceleration” in advanced economies
ii.Global growth is projected to decelerate from 3.1% in 2022 to 2.1% in 2023.
- It will be 2.4% in 2024 and 3% in 2025.
iii.Global growth is projected to slow significantly amid high inflation, tight monetary policy, and more restrictive credit conditions.
iv.In EMDEs other than China, growth is set to slow to 2.9% in 2023 from 4.1% in 2022.
v.In advanced economies, growth is set to decelerate from 2.6% in 2022 to 0.7% in 2023 and remain weak in 2024 at 1.2%.
vi.Public debt averages in Low income countries about 70% of GDP. 14 low-income countries are already in, or at high risk of, debt distress.
vii.On the regional front, South Asia is projected to edge down to 5.9% in 2023 and then to 5.1% in 2024.
About Global Economic Prospects Report:
This WB Group Flagship Report is a product of the Prospects Group in the Development Economics (DEC) and Equitable Growth, Finance, and Institutions (EFI) Vice Presidencies. It examines global economic developments and prospects, with a special focus on emerging market and developing economies. It is issued twice a year, in January and June.
Recent Related News:
i.According to the WB report titled Connecting to Compete 2023: Trade Logistics in an Uncertain Global Economy – the Logistics Performance Index (LPI) and its indicators” released on April 21, 2023, India’s rank increased by 6 places to 38 in the index, from 44 in 2018.
ii.According to the WB report “Striving for Clean Air: Air Pollution and Public Health in South Asia,” concentrations of fine particulate matter (PM) like soot and small dust (PM 2.5) in some of South Asia’s most densely populated and underdeveloped areas are up to 20 times higher than the World Health Organization (WHO) threshold of 5 micrograms per cubic metre (μg/mʒ).
About World Bank (WB):
President (WB Group)– Ajay Banga
Establishment – 1944
Headquarters – Washington D.C, United States (US)
Member Nations – 189