United Nations: Against the backdrop of a global economic deceleration from the fallout of the Russian invasion of Ukraine, the World Bank has cut India’s growth prospects to 7.5 percent for the current fiscal year — but the nation will still retain its position as the world’s fastest-growing economy.
The Bank’s Global Prospects Report reduced India’s growth by 0.5 percent from the 8 percent forecast made in April when the impact of the Ukraine conflict was just beginning to be felt, and 1.2 percent from the 8.7 percent forecast in January.
It estimated India’s growth in the last fiscal year at 8.7 percent.
For the global economy as a whole, the report cut the growth rate by 1.2 percent — from the 4.1 percent forecast in January to 2.9 percent.
World Bank President David Malpass issued a stern warning that the world faces the risk of stagflation — a situation of economic stagnation accompanied by high inflation.
“Even if a global recession is averted, the pain of stagflation could persist for several years — unless major supply increases are set in motion,” he said.
The Bank attributed the growth forecast cut for India to “headwinds from rising inflation, supply chain disruptions, and geopolitical tensions offsetting buoyancy in the recovery of services consumption from the pandemic”.
“Rising inflationary pressures led to an unscheduled policy interest rate hike in May,” it added.
On the other hand, it said, “Growth will also be supported by both private and public fixed investment, buoyed by government incentives and reforms to improve the business climate.”
The Bank forecast India’s growth rate in the next fiscal year to moderate to 7.1 percent, although it will be 0.3 percent higher than the projection in January.
The Bank’s latest growth forecast for India is higher than the 6.4 percent forecast by the United Nations last month.