The World Bank on Tuesday slashed its India GDP forecast to 6.3 per cent for the fiscal against its earlier estimate of 6.6 per cent.

The Asian Development Bank has also lowered its GDP forecast for 2023-24 to 6.4 per cent from its earlier forecast of 7.2 per cent growth in December.

Growth in gross domestic product is likely to be constrained by slower consumption growth and challenging external conditions, the World Bank said in its India Development Update.

Government consumption is projected to grow at a slower pace because of the withdrawal of pandemic-related fiscal support measures, the World Bank said.

“In India, South Asia’s largest economy, high borrowing costs and slower income growth are expected to dampen consumption and lower growth to 6.3 per cent in FY 2023-24,” the World Bank said in a report for South Asia released on Tuesday ahead of the annual spring meeting of the IMF and the World Bank.

Multi-lateral funding agency Asian Development Bank also said India’s economic growth is expected to moderate to 6.4 per cent in the current financial year due to tight monetary conditions and elevated oil prices compared with 6.8 per cent expansion for the financial year ended March 2023.

The projections are part of the latest edition of ADB’s flagship economic publication, Asian Development Outlook (ADO) April 2023.

“The Indian economy continues to show strong resilience to external shocks,” said Auguste Tano Kouame, World Bank’s country director in India.

“Spillovers from recent developments in financial markets in the US and Europe pose a risk to short-term investment flows to emerging markets, including India,” said Dhruv Sharma, senior economist, World Bank, and lead author of the report. “But Indian banks remain well capitalised.”

ADB view

“If global conditions do not deteriorate as much as anticipated, higher global demand will likely spur growth in India. However, any worsening of geopolitical tensions is likely to exert further downward pressure on global demand and increase uncertainty, tamping down India’s growth rate and pushing up inflation,” the ADB said.

“Weather shocks to agricultural production, including abnormal rainfall or higher temperatures, could spur food inflation, thereby putting further pressure on the central bank.”