In its Global Economic Prospects report released on Wednesday, the World Bank projected a five per cent growth rate for India in the 2019-2020 fiscal, also stating that it might recover to 5.8 per cent in the following financial year.
The Washington-based organization mentioned lessened consumption and tighter credit conditions in the non-banking sector are contributing to a substantial weakening of the domestic demand in the country.
“In India, where weakness in credit from non-bank financial companies is expected to linger, growth is projected to slow to five per cent in fiscal year 2019/20, which ends March 31, and recover to 5.8 per cent the following fiscal year,” the World Bank said on Wednesday.
“In India, activity was constrained by insufficient credit availability, as well as by subdued private consumption,” the report stated.
“Growth in India is projected to decelerate to five per cent in FY(financial year) 2019/20 amid enduring financial sector issues. Key risks to the outlook include a sharper-than-expected slowdown in major economies, a re-escalation of regional geopolitical tensions, and a setback in reforms to address impaired balance sheets in the financial and corporate sectors,” the report further said.
Meanwhile, for India’s neighbouring countries Bangladesh, the growth rate has been projected to remain above seven per cent and, in Pakistan, it is projected to languish at three per cent or less through 2020 as macroeconomic stabilisation efforts weigh on economic activity.
The report also highlighted that global economic growth is to edge up to 2.5 per cent in 2020 as investment and trade will gradually recover from last year’s significant weakness, however, it warned that downward risks still persist.
The bank highlighted that in the case of India, economic activity slowed substantially in 2019, with the deceleration most pronounced in the manufacturing and agriculture sectors, whereas government-related services sub-sectors received significant support from public spending.
This is the slowest growth forecast since the 3.1% rate recorded in financial year 2008-09 when the global financial crisis had derailed the economy. GDP growth decelerated to five percent and 4.5 per cent in the April-June and July-September quarters of 2019, respectively, the lowest readings since 2013, it said. The World Bank’s latest update is also in line with the Reserve Bank of India’s October policy estimate in which it slashed the economy’s expected growth to 5% this fiscal year.