World Bank Cuts India’s GDP Growth Forecast for FY24 to 6.3% While Raising Global Outlook

The World Bank has revised its global economic forecasts in its latest Global Economic Prospects report. While it predicts an upward trajectory for global GDP growth in 2023, it has trimmed India’s growth forecast for the fiscal year 2024. This article examines the World Bank’s projections and explores the factors influencing the global and Indian economies.

Global Economic Outlook:

1.1 Global GDP Growth: The World Bank forecasts real global GDP to climb 2.1% in 2023, up from the previous forecast of 1.7% in January. However, this growth rate remains below the 2022 rate of 3.1%.

1.2 Factors Affecting Growth: The report attributes the higher-than-expected growth to the resilience of major economies, particularly the United States, but warns of potential drags due to higher interest rates in the coming year.

1.3 Revised 2024 Growth Forecast: The World Bank has lowered its 2024 global growth forecast to 2.4% from the previous projection of 2.7%. This adjustment reflects the continuing effects of tighter monetary policies, which have impacted business and residential investment.

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India’s GDP Growth Forecast:

2.1 Revised Forecast: The World Bank has reduced India’s GDP growth forecast for the fiscal year 2024 to 6.3%, down from the previous projection of 6.6% made in January.

2.2 Factors Influencing India’s Growth: The report suggests that India’s growth slowdown is primarily driven by the lagged and ongoing effects of monetary tightening and more restrictive credit conditions.

2.3 Implications for the Indian Economy: The trimmed growth forecast may have implications for various sectors in India, including investment, job creation, and overall economic development.

Regional and Country-Specific Projections:

3.1 United States: The World Bank has raised its growth forecast for the United States in 2023 to 1.1%, more than double the 0.5% projection in January. However, the 2024 forecast has been halved to 0.8%.

3.2 China: China’s growth forecast for 2023 has increased to 5.6%, compared to the 4.3% projection in January, reflecting a recovery from COVID-19-related slowdowns. However, the forecast for 2024 has been reduced to 4.6%.

3.3 Eurozone: The eurozone’s growth outlook for 2023 has improved, with a forecast increase to 0.4% from a previously flat outlook in January. However, the forecast for 2024 has been slightly reduced.

Banking Sector Stress and Financial Conditions:

4.1 Tighter Financial Conditions: The World Bank highlights recent banking sector stress as a contributing factor to tighter financial conditions that are expected to persist into 2024.

4.2 Downside Scenarios: The report presents potential downside scenarios where banking stress leads to a severe credit crunch and broader financial market stress, potentially resulting in slower growth or even a global recession in 2024.

Inflation and Labor Demand:

5.1 Inflation Outlook: The World Bank expects inflation to gradually decrease as global growth decelerates and labor demand softens in many economies. However, core inflation is predicted to remain above central bank targets in several countries throughout 2024.

5.2 Stable Commodity Prices: The report suggests that stable commodity prices will contribute to the expected inflation trajectory.

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