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5th April 2023 (7 Topics)

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.

 

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