The economic growth prospects for India have seen some upward movements in the recent reports published by international financial institutions. The detailed coverage by the World Bank is insightful and captures some of the key elements which have contributed to the current or proposed growth. There is an interesting development on India’s AI ecosystem with a Government report published this month.
World Bank – India continues to show resilience against the backdrop of a challenging global environment, according to World Bank’s latest India Development Update (IDU). The IDU, the Bank’s flagship half yearly report on the Indian economy, observes that despite significant global challenges, India was one of the fastest-growing major economies in FY22/23 at 7.2%. India’s growth rate was the second highest among G20 countries and almost twice the average for emerging market economies. This resilience was underpinned by robust domestic demand, strong public infrastructure investment and a strengthening financial sector. Bank credit growth increased to 15.8% in the first quarter of FY23/24 compared with 13.3% in the first quarter of FY22/23. The IDU expects that global headwinds will continue to persist and intensify due to high global interest rates, geopolitical tensions, and sluggish global demand. As a result, global economic growth is also set to slow down over the medium term against a background of these combined factors. In this context, the World Bank forecasts India’s GDP growth for FY23/24 to be at 6.3%. The expected moderation is mainly due to challenging external conditions and waning pent-up demand. However, service sector activity is expected to remain strong with growth of 7.4% and investment growth is also projected to remain robust at 8.9%. “An adverse global environment will continue to pose challenges in the short-term,” said Auguste Tano Kouame, World Bank’s Country Director in India. “Tapping public spending that crowds in more private investments will create more favorable conditions for India to seize global opportunities in the future and thus achieve higher growth.” The India Development Update is a companion piece to the South Asia Development Update, a twice-a-year World Bank report that examines economic developments and prospects in the South Asia region and analyzes policy challenges faced by countries.
International Monetary Fund (IMF) – The International Monetary Fund (IMF) recently released its World Economic Outlook (WEO) October 2023 report titled ‘Navigating Global Divergences’. As per the report, growth in India is projected to remain strong, at 6.3 percent in both 2023 and 2024, with an upward revision of 0.2 percentage point for 2023 (forecasted in WEO July Update, which was covered by Asia Law Portal here) reflecting stronger-than-expected consumption during April-June.
UN Body – The UN Conference on Trade and Development (UNCTAD) has raised its economic growth forecast for India in 2023 to 6.6%, up from the previous prediction of 6%. However, it expects growth to slow to 6.2% in 2024. The UNCTAD also predicts global economic output growth to decelerate to 2.4% in 2023 before a small uptick to 2.5% in 2024. The report highlights the need for policy changes and institutional reforms to prevent a lost decade, and mentions that some economies, including India, have shown resilience while others face challenges. The report mentioned that in India, the external sector – alongside the private and government sector – has contributed to domestic growth, partly helped by many countries redirecting trade flows away from the Russian Federation, with which India maintains a direct relationship. Growth in 2022 moved back in line with pre-pandemic rates and is expected to continue into next year. However, other indicators still suggest caution: with rates of unemployment still standing at 8.5 per cent in June 2023, employment remains disappointingly low by historical standards. Inequality has also significantly increased – as suggested by data on real wages and the labour share – which could hinder growth.
India AI Report – Seven working groups of Ministry of Electronics and Information Technology (MeitY) submitted the first edition of IndiaAI report recently. The report was officially handed over to Shri Rajeev Chandrasekhar, Union Minister of State for Skill Development & Entrepreneurship and Electronics & IT. He expressed that this report is set to serve as India’s guiding roadmap for the development of its AI ecosystem. The Government of India’s approach to AI has been holistic and ambitious, as evidenced by the breadth and scope of government interventions under the umbrella programme – IndiaAI. IndiaAI has a mission-centric approach which ensures a precise and cohesive strategy to bridge the gaps in existing AI ecosystem viz-a-viz Compute infrastructure, Data, AI financing, Research and Innovation, targeted skilling and institutional capacity for Data to maximize the potential of AI for advancing India’s progress. Minister Shri Rajeev Chandrasekhar highlighted how IndiaAI will not only catalyse and support the startup and entrepreneurship ecosystem but also other areas like that of India datasets program and India AI Compute Platform. The working groups detailed out the operational aspects of establishing Centers of Excellence (CoEs), and the institutional framework on governing data collection, management, processing and storage by the National Data Management Office (NDMO). The report also has recommendations on how India can leverage its demographic dividend and play to its strengths as an IT superpower to further the penetration of AI skills in the country, strengthening of the AI compute infrastructure in India to support the AI innovation through public-private partnerships (PPPs).