India story intact in worst half decade of growth in 30 years, says World Bank

The World Bank sees India retaining the fastest-growing major economy tag, logging log 6.4% growth in FY25 and accelerating to 6.5% in FY26 despite a slowdown. “Investment is envisaged to decelerate marginally but remains robust, supported by higher public investment and improved corporate balance sheets, including the banking sector,” the World Bank said in its latest Global Economic Prospects report. 

India forecast an annual growth of 7.3% in the fiscal year ending in March, the highest rate of any of the major global economies, in what is being seen as a boost for Prime Minister Narendra Modi ahead of the general elections scheduled to be held before May.

“These are early projections for 2023/24,” the National Statistical Office (NSO) said in a statement this Friday, adding improved data coverage, actual tax receipts and spending on state subsidies could affect subsequent revisions.

The World Bank estimates India to grow 6.3% this fiscal. The World Bank has projected global growth to slow further to 2.4% in 2024 from 2.6% projected for 2023, calling it the weakest half-a-decade performance in 30 years. 

The bank warned that without a “major course correction,” the 2020s will go down as “a decade of wasted opportunity.”

On private consumption in the coming fiscal year, the World Bank said it is likely to taper off. "As post-pandemic pentup demand diminishes and persistent high food price inflation is likely to constrain spending, particularly among low-income households.” 

The institution cited interest payments as a cause of concern. “In India, government revenues are expected to gain from solid corporate profits, and current expenditures are likely to decrease with the conclusion of pandemic-related measures. Interest payments are projected to be large in countries with elevated debt levels, including India, Pakistan, and Sri Lanka.”

The bank flagged risks from extreme weather events and elections. “The heightened uncertainty around these elections could dampen activity in the private sector, including foreign investment,” it said, noting that the implementation of policies to reduce uncertainty and strengthen growth potential after elections could lead to an improvement in growth prospects.