The World Bank today projected a growth rate of 6.5 per cent for the Indian economy for the financial year 2022-23, a drop of one per cent from the previous June 2022 projections, citing the 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, however, the bank said that India is growing stronger than the rest of the world.
The Indian economy grew by 8.7 percent last year.
Hans Timmer, Chief Economist of the World Bank for South Asia, said, “The Indian economy has performed well compared to other countries in South Asia with a relatively strong growth performance … Press Trust of India in an interview.
India has done relatively well with the advantage that it does not have a large external debt, that there is no problem coming from that side, and that it has prudent monetary policy, he said.
The Indian economy has performed well in the services sector in particular and service exports in particular.
“But we have downgraded the forecast for the just started fiscal year and this is mainly because of the deteriorating international environment for India and all countries. We see an inflection point in the middle of this year, and a slowing down. First signs around the world,” he said.
He said the second half of the calendar year is weak in many countries and will remain relatively weak in India as well.
Timmer said this is mainly due to two factors. Real economies of a high-income countries have a slow pace of growth.
Second, there is a global tightening of monetary policy that tightens financial markets and not only 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. .
“So, it (India) has performed relatively well. It is not as weak as some other countries. But it is still in tough weather. It (India) has to navigate higher commodity prices and there are more headwinds at the moment ,” he said in response to a question.
India is doing better than the rest of the world, he said, adding that India has more buffers, especially large reserves in the central bank. It’s very helpful. “Then the government reacted very actively to the COVID crisis,” he said.
The Indian government has set an example for the rest of the world by using digital ideas, like expanding the social safety net. “I think they’re reaching out to about a million people at the moment. It’s also a good response,” he said.
At the same time, he said that he does not agree with all the policies of the Government of India.
“Their reaction to particularly high commodity prices may seem logical in the short term, but may reverse in the long run. For example, export restrictions and export restrictions on wheat or very high tariffs on rice exports,” he said.
They seem logical to create food security domestically, but ultimately this creates more problems in the rest of the region and the rest of the world.
“So not all policies are optimal, but there is a strong response to the crisis in terms of relief efforts, stronger monetary policies and a trend towards a more business friendly environment in general,” Timmer said.
In response to a question, he said that since India needs to focus on some major issues.
“Although we see a relatively favorable growth rate, it is growth that is supported by only a small part of the economy. That sounds good, but if it is not coming from a very broad base, a relatively low growth rate of the economy. does not translate into a significant increase in the income of all households,” he said.
Timmer pointed out that only 20 percent of women are participating in the labor market.
“It’s a problem that has to be addressed. You don’t solve it just by expanding your social security system. It’s important. Ultimately, people should be given the tools to generate income on their own,” he said.
“We have seen in the region and to a lesser extent in India as well that the government was not really prepared to tolerate all the shocks that we are seeing in the region. The COVID shock, the war in Ukraine and commodity prices are at once There are setbacks throughout life and they come one after the other and then also environmental disasters,” he said.
Both the government and the public are not ready to deal with it. And that’s because so few people are fully participating in the economy, he argued, making it a high priority for India to progress there.
“In India, the focus is on the existing big firms. The focus is on FDI. And that’s all great. The focus is on the social safety net. That’s great too. But it’s not enough. You have to integrate more people. economy,” Timmer said.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)