News Highlights:
- World Bank raises India’s growth projection to 6.9 per cent. The World Bank on Tuesday revised India’s 2022-23 GDP growth forecast upward to 6.9% from 6.5% estimated in October after factoring in “a strong outturn” in the second quarter of the current financial year.
- India is “well placed” to navigate global headwinds.
Key Takeaway:
This revision in its FY23 GDP forecast comes two months after the Bank had cut India’s FY23 GDP forecast to 6.5 per cent from 7.5 per cent in an October update, which came in the wake of a series of growth downgrades by rating agencies, investment banks and other multilateral institutions.
Key factors on The World Bank’s India Development Update report:
- The World Bank’s India Development Update report navigating the Storm, upgraded the country’s growth prediction based on its September quarter performance “driven by strong private consumption and investment” that saw 6.3% growth in its GDP.
- The government’s focus on bolstering capital expenditure also supported domestic demand in the first half of FY 22/23.
- India overtook the UK to become the fifth-largest economy in the world.
- High-frequency indicators indicate continued robust domestic demand growth at the start of Q3 FY22/23. India grew 13.5% in the first quarter of 2022-23.
- India’s economic performance upwardly revised, even as growth forecasts of major economies have been downgraded significantly.
- The report forecasts that the Indian economy will grow at 6.6% in the next financial year (2023-24), which is lower than its earlier projection of 7%.
- The report says that a challenging external environment will affect India’s economic outlook through different channels.
- It noted that rapid monetary policy tightening in advanced economies has already resulted in large portfolio outflows and depreciation of the Indian Rupee, while high global commodity prices have led to a widening of the current account deficit.
- It argued that India’s economy is “relatively insulated from global spillovers compared to other emerging markets”, partly because the country has a large domestic market and is relatively less exposed to international trade flows.
- India’s external position has also improved considerably over the past decade, and the current-account deficit is adequately financed by improving foreign direct investment inflows and a solid cushion of foreign exchange reserves.
- India is not completely isolated from the global downturn. The report said that a one percentage point decline in growth in the US is associated with a 0.4 percentage point decline in India’s growth. However, the effect is around 1.5 times larger for other emerging economies.
Suggestions by the World Bank:
- India needs to grow at the rate of 8% and above to achieve its aim to become a developed country by 2047, as 6.6% is not enough, even though it is comparatively high growth.
- India’s economy has been remarkably resilient to the deteriorating external environment, and strong macroeconomic fundamentals have placed it in good stead compared to other emerging market economies. However, continued vigilance is required as adverse global developments persist.
Other international agencies that have made similar growth estimates:
The October edition of the International Monetary Fund’s World Economic Outlook also projected India’s GDP growth for 2022-23 and 2023-24 at 6.8% and 6.1%, respectively.
World Bank:
- About:
- Under the terms of the Bretton Woods Agreement, also known as the United Nations Monetary and Financial Conference, the World Bank and International Monetary Fund (IMF) were established simultaneously.
- In December 1945, both organisations were formally established. The World Bank and International Monetary Fund (IMF) are known as the Bretton Wood Twins. The only requirement for a country to join the World Bank is that it must be an IMF member (there are exceptions).
- The World Bank, which has its headquarters in Washington, DC, has 189 members.
- World Bank Group:
- The World Bank’s two institutions comprise IBRD and IDA, whereas the World Bank Group consists of five organisations, all of which are committed to eradicating poverty, increasing shared prosperity, and promoting sustainable development.
- The five development institutions under the World Bank Group are:
- International Bank for Reconstruction and Development (IBRD)
- International Development Association (IDA)
- International Finance Corporation (IFC)
- Multilateral Guarantee Agency (MIGA)
- International Centre for the Settlement of Investment Disputes (ICSID).
- Objectives of the World Bank:
- After World War II, the World Bank was established. So, the World Bank’s primary goal was to rebuild countries damaged by conflict (Target Achieved).
- To encourage developing countries’ development and improve the living level there.
- To encourage long-term capital investment to ensure BOP equilibrium and balanced development of global trade.
- They are encouraging investment in emerging nations. Along with offering support in terms of money, expertise, and technical assistance.
- Reports Released by World Bank:
- World Development Report
- International Debt Statistics
- Ease of Doing Business
- Report Global Economic Prospects.
Conclusion:
World Bank noted that the impact of a tightening global monetary policy cycle, slowing global growth, and elevated commodity prices will mean that the Indian economy will experience lower growth in FY23 compared to FY22. Despite these challenges, the fresh update expects India to register strong GDP growth and remain one of the fastest-growing major economies in the world due to robust domestic demand.
Pic Courtesy: The Indian Express
Content Source: The Indian Express