Washington : The World Bank on Thursday projected a growth rate of 6.5 per cent for the Indian economy for the fiscal year 2022-23 , a drop of one per cent from its previous June 2022 projections , citing deteriorating international environment .
In its latest South Asia Economic Focus released ahead of the annual meeting of the International Monetary Fund and the World Bank , the Bank , however , noted that India is recovering stronger than the rest of the world . The Indian economy grew by 8.7 per cent in the previous year .
” The Indian economy has done well compared to the other countries in South Asia , with relatively strong growth performance … bounced back from the sharp contraction during the first phase of Covid , Hans Timmer , World Bank Chief Economist for South Asia , said .
India , he said , has done relatively well with the advantage that it doesn’t have a large external debt , there are no problems coming from that side , and that there is prudent monetary policy , he observed . The Indian economy has done especially well in the services sector and especially service exports .
” But we have downgraded the forecast for the fiscal year that just started and that is largely because the international environment is deteriorating for India and for all countries . We see kind of an inflection point in the middle of this year , and first signs of slowing across the world , ” he said .
The second half of the calendar year is weak in many countries and will be relative ly weak also in India , he said .
Timmer said that’s mainly because of two factors . One is the slowing of growth in the real economy of high – income countries .
The other one is the global tightening of monetary policy that tightens financial markets and not just that it leads to capital outflows in many developing countries , but it also increases interest rates and uncertainty in developing countries which has a negative impact on investment .
India is doing better than the rest of the world , he said , adding that there are more buffers in India , especially large reserves at the central bank . That’s very helpful . ” Then the government has very actively reacted to the COVID crisis , ” he said .
The Indian government has set an example for the rest of the world , like expanding social safety nets , using digital ideas . ” I think it’s almost up to a million people that they are reaching at the moment . It’s a good response also , ” he said .
At the same time , he said that he does not agree with all the policies of the Indian government .
” Especially their reaction to the high commodity prices might seem logical in the short run , but might backfire in the long run . For example , the export ban on wheat and the exporthan or the very high tariffs on rice exports ” he said . They seem logical to create food security domestically , but ultimately that creates more problems in the rest of the region and the rest of the world .
” So not all policies are optimal , but a strong reaction to the crisis in terms of relief efforts , strong monetary policies , and in general a trend to wards a more business friendly environment , ” Timmer said . Responding to a question , he said since India needs to address some of the key concerning issues .
Timmer pointed out that only 20 per cent of the women are participating in the labor market .
Both the government and the people are not prepared to cope with that . And that is be cause just too few people are fully participating in the economy , he argued , adding that that’s a high priority for India to make progress there .
” In India , the focus is on the existing big firms . Focus is on FDI . And that’s all very good . The focus is on social safety nets . That’s also very good . But it’s not enough . You need to integrate more people in the economy , ” Timmer said .