World Bank has said that inflation in India will further be eased to 5.2 per cent in the financial year 2023-24 against 6.6 per cent in the previous fiscal. In its report, World Bank also projected that the current account deficit of the country will narrow to 2.1 per cent of gross domestic product for the current fiscal year from an estimated three per cent in the previous fiscal.
To check inflation, the RBI has raised interest rates by 250 basis points since May 2022.
However, the World Bank in the report said that rising borrowing costs in the country due to a rise in the interest rates will shrink domestic consumption which will weigh on GDP growth. Considering it along with the recent turmoil in global financial markets, the International Bank has moderately lowered the Indian GDP growth expectation to 6.3 per cent in the financial year 2023-24 which is near to the RBI’s latest projection of 6.4 per cent.
Citing risks arising from global and domestic factors, the Asian Development Bank also projected a 6.4 percent GDP growth in India. As per the financial experts, the recent turmoil in the financial markets of the US and Europe pose a risk to short-term investment flows to India but a surge in India’s services exports is expected to shield the economy from external risks.