The World Bank has retained India's economic growth forecast for the current fiscal at 8.3 per cent as the recovery is yet to become broad-based. As per the first advanced estimates of the national income released by the National Statistical Office (NSO) last week, the economy is projected to grow at 9.2 per cent in 2021-22, surpassing pre-COVID level in actual terms, mainly on account of improved performance, especially in farm, mining and manufacturing sectors.
"India's economy is expected to expand by 8.3 per cent in fiscal year 2021/22 (ending March 2022), unchanged from last June's forecast as the recovery is yet to become broad-based. "The economy should benefit from the resumption of contact-intensive services, and ongoing but narrowing monetary and fiscal policy support," the World Bank said in its latest Global Economic Prospects report released on Tuesday. Further, the report said that growth forecast has been upgraded for 2022-23 and 2023-24 to 8.7 per cent and 6.8 per cent, respectively.
The upward revision reflects an improving investment outlook with private investment, particularly manufacturing, benefiting from the Production-Linked Incentive (PLI) Scheme, and increases in infrastructure investment. "The growth outlook will also be supported by ongoing structural reforms, a better than-expected financial sector recovery, and measures to resolve financial sector challenges despite ongoing risks," the report said.
It also noted that consumer inflation in the major economies of South Asia has been above central banks' targets since late 2019. In India, easing supply disruptions related to COVID and deficient demand contributed to a return of inflation toward the mid-point of the 2-6 per cent target range since mid-2021.
Core inflation, however, remains at the upper end of the target range. The report said that following the major setback to health and economic activity caused by the mid-2021 second wave of COVID in South Asia, economic activity has recovered. New cases of COVID stabilised at lower levels last year but are again accelerating in parts of the region as the Omicron variant spreads rapidly in early 2022. In India, the economic damage caused by the second wave has already been unwound with output effectively back to levels reached prior to the pandemic (2019 Q4) as COVID cases and restrictions subsided, it added.
As per the Global Economic Prospects report, following a strong rebound in 2021, the global economy is entering a pronounced slowdown amid fresh threats from COVID variants and a rise in inflation, debt, and income inequality that could endanger the recovery in emerging and developing economies. Global growth is expected to decelerate markedly from 5.5 per cent in 2021 to 4.1 per cent in 2022 and 3.2 per cent in 2023 as pent-up demand dissipates and as fiscal and monetary support is unwound across the world.