World Bank lowers India’s growth forecast to 6.3%

Context

The World Bank has forecast 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.

About the forecast:

The World Bank has released ‘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 mentioned by world bank for the forecast for India includes:
- Its high borrowing costs,
- Slower income growth causing weaker consumption,
- The government tightening fiscal expenditure.
Major concerns for India remains;
- The female labour participation rate, which had dropped to below 20%, and
- The informal sector neither becoming more 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, according to the World Bank.
Investment growth remained strong and business confidence was also high in India.
For other nations:
- The World Bank forecast for Sri Lanka this calendar year was -4.3% (i.e., a contraction) and for Pakistan was 0.4% for the year ending June 30, 2023.

Other measures 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.