World Bank Cuts India’s GDP Forecast to 6.5%

The World Bank reduced India’s growth prediction for 2022-23 (April-March) by 100 basis points, forecasting that the Indian economy will grow at 6.5 per cent, down from 7.5 per cent in June. India’s GDP registered a growth of 8.7 per cent in 2021-22.

The Bank marked in its latest South Asia Economic Focus, issued ahead of the yearly conference of the International Monetary Fund and the World Bank, that India is recovering faster than the rest of the world.

The Indian economy has done well compared to the other countries in South Asia, with relatively strong growth performance… bounced back from the sharp contraction during the first phase of COVID,” said Hans Timmer, World Bank Chief Economist for South Asia. 

Timmer included that the Indian economy has done exceptionally well in the service sector, particularly in service export. 

But we have downgraded the forecast for the fiscal year that just started, and that is large because the international environment is deteriorating for India and all countries. We see kind of an inflection point in the middle of this year, and first signs of slowing across the world,” one of the leading officials of the World Bank said.

It is the third revision of the World Bank’s forecast for India’s economic growth in FY23. In June, it trimmed its prediction to 7.5%, while in April, it slashed the forecast from 8.7% to 8%. 

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Due to prolonged geopolitical tensions and aggressive monetary policy tightening internationally, the Reserve Bank of India (RBI) has recently reduced its economic growth prediction for the current fiscal year to 7% from 7.2%.

India’s Service Sector Activity 

India’s service sector witnessed a six-month low in September among the global inflation and competitive circumstances. The periodically revised S&P Global India Services PMI Business Activity Index dropped to 54.3 from 57.2, underlining the lowest rate of growth since March. For the consecutive fourteen months, the service sector has registered growth in output. In PMI’s language, a point above 50 indicates growth, while a score below 50 refers to decline. 

The service sector has shown determination and potential in the last few months while witnessing a slowdown in growth velocity in the last month. It can be a major reason behind the reduction in World Banks’ Indian GDP forecast. 

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