World Bank slashes India’s GDP growth forecast to 7.5%, warns risk of 'stagflation'

New Delhi: Rising inflation, supply chain disruptions, and geopolitical concerns have lowered the World Bank's FY23 economic growth forecast for India to 7.5 percent, down from an April estimate of 8 percent.

The World Bank has updated its GDP growth prediction for India for the current fiscal year for the second time (April 2022 to March 2023).

It had lowered the projection from 8.7% to 8% earlier in April, and it is currently expected to be 7.5 percent.

The GDP expansion compares to an 8.7% expansion in the prior fiscal year 2021-22.

"In India, growth is expected to slow to 7.5 percent in fiscal year 2022/23, with headwinds from rising inflation, supply chain disruptions, and geopolitical tensions offsetting buoyancy in the recovery of services consumption following the pandemic," according to the World Bank's latest Global Economic Prospects report.

Fixed investment by the private sector and the government, which has adopted incentives and reforms to improve the business climate, will also assist growth, according to the report. According to the bank, this expectation indicates a 1.2 percentage point reduction in growth from the January projection.

"Growth is likely to decline further in 2023-24, to 7.1 percent, returning to its longer-run potential," it said.

Prices rose across the board in April, pushing WPI or wholesale price-based inflation to a new high of 15.08 percent and retail inflation to a near-eight-year high of 7.79 percent.