The World Bank has revised its FY24 forecast for India to 6.3 per cent in its latest India update, down from its earlier forecast of 6.6 per cent in December 2022. India's GDP growth is expected to be constrained by slower consumption growth and challenging external conditions.
The latest India Development Update, released Tuesday, notes that rising borrowing costs and slower income growth are expected to weigh on private consumption growth. Government consumption is projected to grow slower due to the withdrawal of pandemic-related fiscal support measures.
"The Indian economy continues to show strong resilience to external shocks," says Augusto Tano Kouame, World Bank's country director in India.
The update also notes that although the headline inflation is elevated, it is projected to decline to 5.2 per cent this fiscal amid easing global commodity prices and moderation in domestic demand.
"The Reserve Bank of India (RBI) has withdrawn accommodative measures to rein in inflation by hiking the policy interest rate. India's financial sector also remains strong, buoyed by improvements in asset quality and robust private - sector credit growth," the update notes.
Besides, the government is likely to meet its fiscal deficit target of 5.9 per cent of GDP in this fiscal and combined with the consolidation in state government deficits; the general government deficit is also projected to decline along with the narrowing of the Current Account Deficit ( CAD).
CAD is projected to narrow to 2.1 per cent of GDP from an estimated 3 per cent in FY23 on the back of robust service exports and a narrowing goods trade deficit.
"Spillovers from recent developments in financial markets in the US and Europe pose a risk to short term investment flows to emerging markets, including India. But Indian banks remain well capitalised," said Dhruv Sharma, senior economist at World Bank.