World Bank cuts India’s GDP growth forecast for FY24 to 6.3% in latest Global Economic Prospects report

World Bank expects growth in India to slowdown further to 6.3% in the financial year FY 2023/24 (April to March). This is a 0.3 percentage point downward revision from the previous estimates of 6.6%. The international financial institution attributes constrained private consumption due to high inflation as the main reason for slowdown. Nevertheless, it expects India to continue to be among the fastest-growing economy. 

In its Global Global Economic Prospects report, World Bank explained that the slowdown is attributed to private consumption being constrained by high inflation and rising borrowing costs, while government consumption is impacted by fiscal consolidation.

Nevertheless, World Bank expects India's growth to pick up slightly through FY2025/26 as inflation moves back toward the midpoint of the tolerance range and reforms payoff. 

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India will remain the fastest-growing economy (in terms of both aggregate and per capita GDP) of the largest EMDEs, it added.

According to the World Bank, unexpected resilience in private consumption and investment, and robust growth in the services sector in India, underlie an upward revision to growth in 2023.

World Bank's report said, in India, which accounts for three-quarters of output in the South Asia region, growth in early 2023 remained below what it achieved in the decade before the pandemic as higher prices and rising borrowing costs weighed on private consumption. However, manufacturing rebounded into 2023 after contracting in the second half of 2022, and investment growth remained buoyant as the government ramped up capital expenditure. Private investment was also likely boosted by increasing corporate profits."

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Further, the report added, unemployment declined to 6.8 percent in the first quarter of 2023, the lowest since the onset of the COVID-19 pandemic, and labor force participation increased. India’s headline consumer price inflation has returned to within the central bank’s 2-6 percent tolerance band.

For the fiscal year FY25 , World Bank expects GDP growth rate at 6.4%. While in 2025 fiscal, the growth rate is expected at 6.5%.