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World Bank lowers India’s growth forecast to 6.3%

  • Category
    Economy
  • Published
    7th Apr, 2023

Context

The World Bank, in its report, has forecasted a 6.3% economic growth rate for India in the current fiscal year (FY) which ends March 31 2024, a downgrade of 0.7 percentage points since its October 2022 forecast.

Key-highlights of the forecast:

  • Report: ‘South Asia Economic Focus: Expanding Opportunities: Toward Inclusive Growth’
  • The Indian economy is expected to grow at 4% in FY 2024-25, an upgrade of 0.3 percentage points from the previous forecast.
  • The South Asia region as whole is expected to grow at 6% for the financial year 2024-25.
  • As per its report, the primary reasons for the forecast includes:
    • Its high borrowing costs
    • Slower income growth causing weaker consumption
    • The government tightening fiscal expenditure
  • Major concerns for India remains:
    • Lower female labour participation rate, (dropped to below 20%)
    • Poor condition of informal sector (neither productive nor shrinking)

Female labour participation rate:

Labour force participation rate is the proportion of the population ages 15 and older that is economically active: all people who supply labour for the production of goods and services during a specified period.

  • Female Labour Force Participation Rate has gone up to 25.1% in 2020-21 from 18.6% in 2018-19.
  • The services sector and then the construction sector — were the fastest going industries in India. Investment growth remained strong and business confidence was also high in India.

IMF’s predictions for India

The International Monetary Fund (IMF) has projected India to be the fastest-growing major economy in FY24, retaining the forecast at 6.8% in its latest World Economic Outlook, citing “resilient" domestic demand despite a challenging external environment.

India’s growth prospects for different sectors:

  • India’s economic survey has projected India GDP growth lie in the range of 6 % to 6.8% depending upon the economic and political trajectory.
  • The most important and the fastest growing sector of Indian economy are services.
    • Trade, hotels, transport and communication; financing, insurance, real estate and business services and community, social and personal services account for more than 60 percent of GDP.
    • Agriculture, forestry and fishing constitute around 12 percent of the output, but employs more than 50 percent of the labour force.
    • Manufacturing accounts for 15 percent of GDP, construction for another 8 percent and mining, quarrying, electricity, gas and water supply for the remaining 5 percent.
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