World Bank upgrades India's GDP growth forecast for FY23

India's economy is expected to grow 6.9% in the current fiscal year, the World Bank said in a report on Tuesday, citing tightening monetary policy and high commodity prices as factors impacting the country's growth.

World Bank's India Development Update has upgraded India's growth domestic product (GDP) forecast to 6.9% from 6.5% for FY23, adding that it is well positioned to tackle global headwinds. The Bank trimmed its expectation for next fiscal year to 6.6% from 7% earlier.

Meanwhile, inflation is expected to be 7.1% in FY23, said World Bank adding that the fall in commodity prices could dampen inflationary pressures. It further said that the Indian government on course to meet fiscal deficit target of 6.4%. “India is affected by spillovers from the US, Euro area and China,” it said.

India, like its global peers, has been plagued by a rise in commodity prices and tightening monetary policy by central banks worldwide. However, the World Bank is confident that the global slowdown has a much lower impact on India, compared to other emerging economies.

India’s GDP expanded at 6.3% in the September quarter, slower than the 8.4% growth seen in the same time a year ago, as manufacturing output contracted and the base effect waned, show the official data released last week.

India’s economy had grown at 13.5% in the first quarter and the second quarter growth reported was in line with the Reserve Bank of India's (RBI) forecast. The Central bank has forecast a 7% growth in the current financial year.

India's annual retail inflation eased to a three-month low of 6.77% in October, but some economists believe it could take up to two years before the rate eased to 4%, the middle level of the RBI's target.