The global economic slowdown is impacting India with the reduction of economic growth forecasts by international financial institutions, a downward trend that has been continuing for more than a quarter now. There is hope for improvement with more domestic consumption that is expected to increase. The net investment by foreign portfolio investors have increased this month, which is reassuring in the sliding growth circumstances.

Asian Development Bank The Asian Development Bank (ADB) projects growth in India’s gross domestic product (GDP) to moderate to 6.4% in fiscal year (FY) 2023 ending on 31 March 2024 and rise to 6.7% in FY2024, driven by private consumption and private investment on the back of government policies to improve transport infrastructure, logistics, and the business ecosystem. The projection is part of the latest edition of ADB’s flagship economic publication, Asian Development Outlook (ADO) April 2023, released recently. The growth moderation for India in FY2023 is premised on an ongoing global economic slowdown, tight monetary conditions, and elevated oil prices. The growth rate in India is stronger than in many peer economies, reflecting relatively robust domestic consumption and lesser dependence on global demand. This growth rate was significantly lower than the projection of 7.2% in Asian Development Outlook (ADO) 2022 Supplement, reported by Asia Law Portal in December 2022.  However, FY2024 is expected to see faster growth in investment, thanks to supportive government policies and sound macroeconomic fundamentals, lower nonperforming loans in banks, and significant corporate deleveraging that will enhance bank lending, according to ADO April 2023.

World BankIndia’s growth continues to be resilient despite some signs of moderation in growth, says the World Bank in its latest India Development Update, the World Bank India’s biannual flagship publication. The Update notes that although significant challenges remain in the global environment, India was one of the fastest growing economies in the world. The overall growth remains robust and is estimated to be 6.9 percent for the full year with real GDP growing 7.7 percent year-on-year during the first three quarters of fiscal year 2022/23. There were some signs of moderation in the second half of FY 22/23. Growth was underpinned by strong investment activity bolstered by the government’s capex push and buoyant private consumption, particularly among higher income earners. Inflation remained high, averaging around 6.7 percent in FY22/23 but the current-account deficit narrowed in Q3 on the back of strong growth in service exports and easing global commodity prices. The World Bank has revised its FY23/24 GDP forecast to 6.3 percent from 6.6 percent (December 2022, which was reported by Asia Law Portal). Growth is expected to be constrained by slower consumption growth and challenging external conditions. Rising borrowing costs and slower income growth will weigh on private consumption growth, and government consumption is projected to grow at a slower pace due to the withdrawal of pandemic-related fiscal support measures.

International Monetary Fund – The International Monetary Fund (IMF) recently released its World Economic Outlook April 2023 report titled ‘A Rocky Recovery’. The report forecasts further slide from the January report, covered by Asia Law Portal. The economic growth projection for 2023 is down to 5.9% from 6.1%, a difference of 0.2% and for 2024 is down to 6.3% from 6.8%, a difference of 0.5%. The report forecast that global growth will bottom out at 2.8 percent this year before rising modestly to 3.0 percent in 2024. Global inflation will decrease, although more slowly than initially anticipated, from 8.7 percent in 2022 to 7.0 percent this year and 4.9 percent in 2024. Chief economist of IMF Pierre-Olivier Gourinchas said while the global economy’s gradual recovery is on track, the recent banking instability has highlighted the fragilities in the rebound story. e points since the January forecast. “We realised that 2020-2021 has been actually a lot better than we thought,” IMF economist Daniel Leigh said. “And so actually, there’s less room for catching up,” Mr. Leigh said. “And that pent up demand, from consumption that was informing our previous forecast, is going to be less because they’ve already had more catching up before,” Mr. Leigh said.

“Again, a very strong economy, which is necessary to allow India to continue to converge towards higher living standards and create those jobs that are necessary,” said Mr. Leigh.

Foreign Portfolio InvestorsForeign portfolio investors (FPIs) made their highest buying of 2023 in April to the tune of ₹11,631 crore in Indian equities. This would be the second consecutive month where FPIs are buyers.  

Posted by Sourish Mohan Mitra

Sourish Mohan Mitra, India-qualified lawyer from Symbiosis Law School, Pune and currently working as an in-house counsel in Delhi, India; views expressed are personal; he can be reached at; Twitter: @sourish247

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