World Bank revises India’s growth rate projection, but economy recovering stronger than other nations

Hans Timmer, the chief economist for South Asia at the World Bank, claims that the Indian economy has performed better than that of other South Asian nations. After experiencing a severe contraction during the first phase of COVID, the Indian economy recovered with comparatively high growth.

The World Bank has decreased the predicted growth rate for the Indian economy for the fiscal year 2022–2023 from 7.5 percent in June 2022 to 6.5 percent, citing the worsening global economy. The Work Bank did point out that India’s recovery is more robust than that of the rest of the globe.

To be aware of, the Indian economy expanded by 8.7% in the preceding fiscal year. In advance of its annual conference with the International Monetary Fund, the World Bank released its most recent South Asia Economic Focus, which included the updated predictions.

Hans Timmer, the chief economist for South Asia at the World Bank, claims that the Indian economy has performed better than that of other South Asian nations. According to him, the Indian economy recovered from the first phase of COVID’s steep recession with rather strong growth results.

Hans stated that India had done reasonably well given the benefit of not having a significant external debt. He noted that India maintained cautious monetary policy and that the services sector had performed particularly well for the Indian economy.

Haas claimed that the fiscal year’s prediction was decreased in large part due to the current international situation, which is getting worse for India and all other countries. He added that the second half of the year will be somewhat weak in India and many other nations as an inflection point is recognised in the middle of the year and the first signals of a slowdown are seen globally.

Hans identified two explanations for the slowdown and the ensuing lowered fiscal year forecast: the global tightening of monetary policy and the slowing of growth in the real economies of high-income countries. The tightening of global monetary policy causes capital outflows from many developing nations as well as an increase in interest rates and unpredictability, all of which have a detrimental effect on investment.

India still has a long way to go.

Despite being less exposed and performing better than some other countries, India is still not out of the woods and must deal with the increasing commodity costs, according to Haas.

He stated that by utilising digital technologies and extending social safety nets, the Indian government has served as an example for the rest of the globe.

However, the chief economist for South Asia at the World Bank does not support all of the government of India’s initiatives.

The Narendra Modi administration’s response to the rising cost of commodities may ultimately prove counterproductive. Even if it makes sense to increase local food security, he claimed that the government’s choice to forbid the export of wheat and impose extremely high tariffs on rice exports really makes matters worse in the rest of the area and around the world.

Hans stated that some of the major concerns needed to be addressed by India “Even if we see a growth rate that is favourable, only a small portion of the economy is supporting it. The growth rate of a very small sector of the economy may sound excellent, but if it is not supported by a much wider base, it won’t result in meaningful income growth for all people.

The emphasis in India is on FDI and the huge, already-existing companies. The social safety nets are the main topic. But this is insufficient. More people must be included in the economy “added said.