BackWorld Bank cuts India growth estimate by 1 percentage point
India’s services exports have recovered more strongly than in the rest of the world
PremiumNEW DELHI : The World Bank on Thursday lowered its FY23 growth forecast for India by one percentage point to 6.5% from its June estimate in line with its downward revision for entire South Asia’s growth.
The multilateral agency lowered the regional growth to an average of 5.8% this year, a downward revision of one percentage point from the forecast it made in June, against a 7.8% growth in the year before when most countries were rebounding from the pandemic slump.
The World Bank acknowledged that Asia’s third-largest economy has recovered from the pandemic more strongly than the world average. India’s economy is to grow at 7% in FY24, the agency said, lowering its forecast by ten basis points from its June estimate.
“In India, services exports have recovered more strongly than in the rest of the world, and India’s ample foreign reserve buffers have afforded resilience to the country’s external sector. In most countries in the region, telecom and business services are also driving the recovery," the World Bank said in its report. In contrast to the struggles in Sri Lanka, both manufacturing and services activities have been expanding in India since at least January, and at faster speeds than the rest of the world, it said.
However, even for countries that have recovered relatively strongly, covid-era scars remain a roadblock, the report said. “Weaknesses in supply chains and employment remain as covid scars prove long-lasting, even in India where recovery leads the region. The PMI manufacturing suppliers’ delivery time, a gauge for supply chain delays has only improved slightly in India since June 2022," the report said. Also, inflation remains a concern. It has become more broad-based in South Asian countries as higher inflation spreads to non-energy goods.
Across goods categories, higher inflation was mainly concentrated in energy-related categories and edible oils following the war in Ukraine. In India, vegetable price inflation increased from 5.1% in January to 17.3% in June, the report said. India’s economy had expanded by a less-than-expected 13.5% in the June quarter and is expected to complete FY23 with a 7% growth, according to the Reserve Bank of India.
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