Concerning global economic slowdown stirring India, World Bank cuts growth forecast from 7.5% to 6%

New Delhi, October 14: The World Bank cut India’s economic growth forecast by the most among South Asian nations on Sunday, below the outlook pegged by the nation’s central bank for this year, mainly because of a deceleration in domestic demand.

 

"India’s gross domestic product growth is projected at 6 per cent in the fiscal year started on April 1, compared with 7.5 per cent forecast in April and 6.8 per cent recorded a year earlier", the bank said in its latest South Asia Economic Focus report. "Growth is expected to gradually recover to 6.9 per cent in 2020-21 and to 7.2 per cent in the following year", it added.

 

 

India’s cyclical slowdown being severe, the weakness is mostly due to a deceleration in local demand. In such a weak economic environment, structural issues surface and the weak financial sector is becoming a drag on growth. Earlier this month, the Reserve Bank of India downgraded its economic growth projection by the biggest cut in its forecast in at least five years to 6.1 per cent this year. GDP growth cooled for a fifth straight quarter to 5 per cent in the three months ended June, at the slowest pace since March 2013.

 

The critical situation demands decisive policy actions, and initial government steps point in the right direction, with the RBI embarking on an easing cycle and the government announcing a stimulus package recently. The main policy challenge is to address the sources of softening private consumption and the structural factors behind weak investment.

 

Meanwhile, the World Bank Group’s president David R. Malpass is slated to be in New Delhi this month wherein he will give a lecture on the ‘role of financial sector in development’ to India’s top policy makers. The lecture is part of the series being hosted by India’s federal think tank Niti Aayog and is aimed at bringing global experts to India to interact with the country’s top policy makers as the National Democratic Alliance government aims to grow Indian economy to $5 trillion by 2024.