On Tuesday, two multilateral institutions presented their regional economic outlook for this year, downgrading their projection of India’s growth prospects in 2023-24. The World Bank has cut its real GDP growth forecast for the country to 6.3%, from 6.6% it had estimated a few months earlier and 7% projected in October 2022. The main national factors it reported for the downgrade are: rising borrowing costs otherwise resilient consumer demand, government consumption will likely contract, while service sector growth will fall to a three-year low of 6.7 %, compared to an estimated 9.5% in 2022-23. The Manila-based Asian Development Bank (ADB) noted that a rebound in domestic demand from China and India (which it said should remain strong) would improve Asia’s growth outlook. . However, he cut his 2023-24 GDP growth forecast for India from 7.2% to 6.4%, citing tight monetary conditions and waning optimism over trade conditions which he said would lead to a lower growth in private investment (which had only seen a post-COVID recovery start so far). In addition to these domestic issues, of course, both institutions cited the effects of the prevailing difficult conditions in the global economy, which have recently been exacerbated by a series of bank failures in the developed world and the resurgence of concerns about oil prices towards the north despite slowing global demand as producers cut production in unison.
To be clear, the government, which presented the Union budget about two months after the last forecasts of these institutions, of a growth higher than 7%, had not formulated such high hopes for this year. The economic study pegs growth for 2023-24 at 6.5%, while the Reserve Bank of India (RBI) estimates it at 6.4%. However, the current estimate for India’s growth for the past year is 7%, while the World Bank and AfDB expect it to be slightly lower at 6.9% and 6, 8%, respectively. A better picture of the basis on which this year’s growth should be calculated will only emerge by the end of May, when the first estimates for the last quarter of 2022-23 are released. The world would also have turned a few more times by then and the 2023-24 forecast will be revised regardless of the wind direction. At the same time last April, the International Monetary Fund had just revised downwards its estimate of India’s growth for the past year, from 9% to 8.2%, while the World Bank, the ADB and the RBI had projected it at 8%, 7.5% and 7.2%, respectively. Policymakers can safely mitigate the noise generated by these numbers, but should heed the reported signs of stress to proactively minimize any impending harm.