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The latest projection is quite close to Reserve Bank of India’s (RBI) projection of 7 per cent growth for India in FY23.
The World Bank has upgraded India’s gross domestic product (GDP) forecast for fiscal 2022-23 to 6.9 per cent from 6.5 per cent earlier. The revision was due to higher resilience of the Indian economy to global shocks and better-than-expected second quarter numbers, the global financial organisation said in its latest India Development Update.
“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,” said Auguste Tano Kouame, World Bank’s country director in India.
“However, continued vigilance is required as adverse global developments persist,” he said.
In October, the World Bank had slashed India’s GDP forecast by one percentage point to 6.5 per cent from its June projection of 7.5 per cent, citing impact of ongoing war in Ukraine, rising global interest rates and high inflation.
The report forecasts that the country’s economy will grow at slightly a lower rate of 6.6 per cent in fiscal 2023-24. A challenging external environment will affect India’s economic outlook through different channels.
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, the report states.
However, it argues that India’s economy is relatively insulated from global spillovers compared to other emerging markets. This is partly because India has a large domestic market and is relatively less exposed to international trade flows.
The report found that while a 1 percentage point decline in growth in the United States is associated with a 0.4 percentage point decline in India’s growth, the effect is around 1.5 times larger for other emerging economies.
India’s external position has also improved considerably over the past decade. The current-account deficit is adequately financed by improving foreign direct investment inflows and a solid cushion of foreign exchange reserves, it said.
Policy reforms and prudent regulatory measures have also played a key role in developing resilience in the economy. Increased reliance on market borrowings has improved the transparency and credibility of fiscal policy and the government has diversified the investor base for government securities, the report noted.
Fibre2Fashion News Desk (DS)
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