World Bank Cuts India's Growth Projection as 'Unprecedented Shocks' Rattle South Asia

On Friday. Reserve Bank of India Governor Shaktikanta Das said that economic activity in India remains stable despite the continuing recovery from the COVID-19 pandemic and geopolitical tensions that have had an adverse effect on the global economy in the last two and a half years.

The World Bank slashed India’s gross domestic product (GDP) growth forecast to 6.5 percent on Thursday against its June estimate of 7.5 percent for the current financial year ending March 2023.

This is the third revision by the World Bank since April, when it downgraded the growth projection from 8.7 percent to 8 percent for the current financial year.

However, the multilateral institution expressed satisfaction over a recovery in exports and the services sector, which is stronger than the global average. The bank said that India's ample foreign reserves served as a buffer to external shocks.

"Pandemics, sudden swings in global liquidity and commodity prices, and extreme weather disasters were once tail-end risks. But all three have arrived in rapid succession over the past two years and are testing South Asia's economies," Martin Raiser, World Bank vice president for South Asia, said.

The economist has advised countries to build a more robust fiscal and monetary buffer to face these unprecedented shocks.

Last Friday, the Reserve Bank of India also cut its growth forecast to 7 percent from an earlier projection of 7.2 percent because of extended geopolitical tensions and aggressive monetary tightening in the West.

For its part, the United Nations Conference on Trade and Development (UNCTAD) Trade and Development Report predicted a 5.7 percent growth in 2022-23 on Tuesday, down from 8.2 percent the last year.

"India experienced an expansion of 8.2% in 2021, the strongest among G20 countries. As supply chain disruptions eased, rising domestic demand turned the current account surplus into a deficit, and growth decelerated," the report said.