World Bank Slashes India’s GDP Growth Forecast for FY22-23 to 8 Percent

World Bank on India’s GDP

The World Bank has slashed the GDP growth forecast for India in FY2022/23 to 8 per cent in its bi-annual “South Asia Economic Focus” report, due to the negative impact of the war in Ukraine on FY23 growth. Earlier in January 2022, the growth forecast for FY23 was estimated at 8.7 per cent.

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Reasons:

• The World Bank said a further escalation in the war in Ukraine could scare investors in emerging market securities and debt instruments and lead to a capital flight from South Asia to “safe havens” in the West.
• Foreign investors have already been exiting India’s financial market since October 2021, due to the impending monetary tightening by the US Federal Reserve. Recent developments in Eastern Europe have intensified the capital outflow, weakening the Indian rupee (INR).
• Maintaining macroeconomic stability through prudent and transparent policies will be important also if the Indian government turns to domestic borrowing.

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