According to the latest economic update from the World Bank, India’s economic growth rate will slow to 6.6% in the next financial year, down from an expected 6.9% in 2022-23. Despite this projected slowdown, India is still expected to be the fastest growing economy among the seven largest emerging-market and developing economies (EMDEs). In the current fiscal year, the growth rate is projected at 6.9%, which is a significant drop from the 8.7% growth rate in the previous year. The growth rate for 2024-25 is projected to be 6.1%.
The World Bank cited a slowdown in the global economy and rising uncertainty as the main factors that will weigh on export and investment growth. The government has taken steps to increase infrastructure spending and facilitate businesses, which is expected to crowd-in private investment and support the expansion of manufacturing capacity. However, despite these efforts, growth is projected to slow to 6.6% in FY2023/24 before falling back towards its potential rate of just above 6%.
Despite the projected slowdown, the GDP expanded by 9.7% on an annual basis in the first half of the 2022-23 fiscal year, reflecting strong private consumption and fixed investment growth. However, consumer inflation in most of the last year was above the Reserve Bank’s upper tolerance limit of 6%, which prompted the policy rate to be raised by 2.25 percentage points between May and December. Additionally, India’s goods trade deficit has more than doubled since 2019, and was USD 24 billion in November, with deficits for crude petroleum and petroleum products (USD 7.6 billion) and other commodities (such as ores and minerals at USD 4.2 billion) accounting for the widening.