Based on inflationary pressures, supply-chain challenges, and geopolitical concerns resulting from Russia’s invasion of Ukraine, the World Bank decreased India’s real gross domestic product (GDP) growth prediction for 2022-23 (FY23) to 7.5 percent from 8%.
The multinational agency also cut its global growth prediction for 2022 to 2.9 percent from 4.1 percent in its latest Global Economic Prospects report.
According to the World Bank, growth would be aided by private sector fixed investment as well as government-led incentives and reforms aimed at improving the business climate. The World Bank has changed its GDP growth prediction for India in FY23 for the second time. It had lowered its projection from 8.7% to 8% in April.
S&P and the International Monetary Fund were among the institutions that recently lowered their India projection for FY23. The World Bank’s prediction, at 7.5 percent, is somewhat more optimistic than the Reserve Bank of India’s (RBI) forecast of 7.2 percent.
India’s GDP increased by 8.7% in 2021-22, making it the world’s fastest-growing major economy. The agriculture sector and government final consumption spending were the main contributors to the production.
As inflation impacts family savings and company profits, the RBI’s monetary policy committee is anticipated to announce a repo rate drop of at least 50 basis points on Wednesday. To keep prices in check, the Centre decreased excise rates on gasoline and diesel, imposed export restrictions on products like wheat, and reduced tariffs on other items.
Prices rose across the board in April, pushing the wholesale price index-based inflation rate to a series high of 15.08 percent and retail inflation to a near-eight-year high of 7.79 percent.
The conflict in Ukraine is causing high commodity prices, causing supply disruptions, rising food insecurity and poverty, intensifying inflation, contributing to tighter financial conditions, magnifying financial fragility, and creating policy uncertainty.