Produced by: Tarun Mishra
Designed by: Mohsin Shaikh
The World Bank's recent update suggests that the Indian economy may experience a slower growth rate of 6.3% in the fiscal year 2023-24, down from 7.2% recorded in the previous fiscal. However, India will still remain among the fastest-growing global economies
The anticipated growth slowdown is primarily attributed to the high base effect, which makes it more challenging to achieve subsequent growth after a period of robust economic expansion
The World Bank projects that inflation in India will average 5.9% in FY24, just below the Reserve Bank of India's (RBI) comfort zone of 4% (+/- 2%). This persistently high consumer inflation remains a concern despite the RBI's efforts to combat it
India's fiscal deficit is expected to decrease to 8.7% in FY24, down from 9% of GDP in FY23, according to the World Bank's assessment. The fiscal deficit represents the gap between government earnings and expenditures
In the Union Budget, the government said it aimed to reduce the fiscal deficit to 5.9% of GDP for the current fiscal year 2023-24. The long-term goal is to achieve a fiscal deficit lower than 4.5% of GDP by FY 2025-26
The World Bank cautions that the government's plan for fiscal consolidation could face challenges as it expands food subsidy programs to mitigate the impact of rising prices ahead of the 2024 general elections
The current account deficit is expected to narrow to 1.4% of GDP in FY24, primarily due to a decrease in the merchandise trade deficit. A current account deficit arises when a country's imports, investment income, and transfers abroad exceed its exports and income from foreign sources
India's public debt is projected to remain stable at around 83% of GDP, decreasing slightly to 82.4% by FY26. The majority of this debt is held domestically, minimising currency risks
According to the World Bank India director, Auguste Tano Kouame, achieving gender parity in the labor force, with women comprising 50%, could boost India's GDP growth rate by 1%. During an interview with Mint, he said that this participation could help India move closer to the 8% growth target required to reach a $5 trillion economy by 2030
Kouame also mentioned the potential for substantial investments in India, estimating approximately $7 billion even before Indian securities are included in the JPMorgan emerging markets bond index in 2024. Post-inclusion, investments exceeding $25 billion are anticipated. Additionally, increasing private investment, workforce re-skilling, and expanding financial access for micro, small, and medium-sized enterprises (MSMEs) could contribute to India's sustained growth amidst global challenges