Washington: The World Bank today forecasted an economic growth rate of 6.5% for India for the fiscal year 2022–2023—a decrease of 1% from its earlier predictions made in June 2022—citing a worsening global economic climate.
However, the Bank said in its most recent South Asia Economic Focus, which was released before the annual meeting of the International Monetary Fund and the World Bank, that India is rebounding more swiftly than the rest of the world. The Indian economy expanded by 8.7% the year before.
Hans Timmer, the World Bank’s chief economist for South Asia, told Press Trust of India in an interview that the Indian economy has performed well when compared to the other South Asian nations, with comparatively good growth performance.
He claimed that India has fared rather well thanks to the advantages of not having a significant external debt, the absence of related issues, and a sound monetary policy.
The services industry, and notably service exports, have performed particularly well for the Indian economy.
The international situation is getting worse for India and other nations, thus we have reduced the projection for the fiscal year that just began. In the middle of this year, we kind of see an inflection point and the beginning of slowing down globally, he added.
According to him, the second half of the year would be weak in India as it is in many other nations.
Timmer claimed there are two key reasons behind this. One is the slowdown of actual economic growth in high-income nations.
The other is the global tightening of monetary policy, which tightens financial markets and discourages investment not just by causing capital outflows from many developing nations but also by raising interest rates and creating more uncertainty there.
India has therefore performed rather well. It is less exposed than some of the other nations. But the weather is still bad. In answer to a query, he remarked that India must navigate the current headwinds of increased commodity prices.
According to him, India is performing better than the rest of the globe because it has greater safety nets, particularly sizable central bank reserves. That is extremely beneficial. The administration has also responded to the COVID situation extremely vigorously, he claimed.
The Indian government has led by example by utilizing digital concepts to strengthen social safety nets. They are currently reaching close to a million individuals, in my opinion. He said that it was a fantastic answer as well.
He said that he does not support all of the Indian government’s policies at the same time.
In particular, their response to the high commodity prices may appear sensible in the short term, but it might have unintended long-term consequences. He cited the export restrictions on rice and wheat as two examples, as well as the prohibitively high taxes on rice exports.
They appear to be making sense by ensuring local food security, but in the end, this just makes matters worse for the rest of the globe and the rest of the area.
Timmer added that while not all measures are ideal, there has been a robust response to the crisis in terms of relief initiatives, strong monetary policies, and generally a move towards a more business-friendly climate.
In response to a query, he stated that India must address some of the most important troubling concerns.
Even while we see a growth rate that is generally positive, just a tiny portion of the economy is supporting it. It may seem fantastic, but if it doesn’t come from a much wider base, the growth rate of a very tiny sector of the economy won’t result in a meaningful increase in household income, he added.
Timmer emphasized that just 20% of women are actively engaged in the labor force. Simply expanding your social security system won’t fix it. That’s significant. In the end, individuals should be given the means to support themselves, he said.
The government was not ready to withstand all the shocks that we are experiencing in the area, as we have seen in the region and to some extent in India as well. According to him, the COVID shock, the conflict in Ukraine, the commodity prices, and finally the environmental calamities are all once-in-a-lifetime shocks that occur one after the other.
The populace and the government are both ill-equipped to handle that. He asserted that this is the case because far too few people are actively engaged in the economy, adding that improving this situation is a top priority for India.
The current large corporations are the emphasis in India. FDI is the focus. And all of it is excellent. Social safety nets are the main topic. That’s also excellent. But it’s insufficient. More people need to be included in the economy, according to Timmer.