World Bank Trims India’s GDP Growth Forecast To 6.3% In FY24

The World Bank has reduced India's GDP growth forecast while simultaneously increasing its global growth projections.

India’s GDP growth for FY24 is seen at 6.3% as compared with a previous estimate of 6.6% in January, according to its latest Global Economic Prospects report.

This revision is primarily attributed to constraints faced by private consumption due to high inflation and increasing borrowing costs, as well as the impact of fiscal consolidation on government consumption.

Growth is expected to experience a slight improvement through FY26 as inflation moves towards the mid-point of the tolerance range and reforms payoff, the report said.

India is projected to retain its position as the fastest growing economy among the emerging and developing economies, both in terms of high aggregate and per capita GDP growth.

Meanwhile, after a 3.1% expansion in the previous year, the global economy is expected to experience a significant slowdown in 2023, with growth forecast at 2.1%. This can be attributed to ongoing monetary policy tightening aimed at curbing high inflation rates. However, the report predicts a recovery in 2024, with global growth seen at 2.4%. In January, estimates had placed global growth at 1.7%.

The report highlighted persistent inflationary pressures and the substantial impact of tight monetary policy on economic activity. The recent stress seen in the banking sector of advanced economies is also expected to weigh on economic performance, resulting in more restrictive credit conditions.

The possibility of more widespread turmoil in the banking sector and the tightening of monetary policy could further weaken global growth. Rising borrowing costs in advanced economies could lead to financial disruptions in more vulnerable emerging market and developing economies, the report said.