The Indian economy is expected to grow at 6.9% in 2022-23, the latest India development update report of the World Bank estimates. The current estimate is 0.4 percentage points higher than the previous forecast done by the World Bank in October.

High nominal GDP growth in Q1 supported strong growth in revenue collection, especially Goods and Services Tax (GST), despite tax cuts on fuel, the report said.

The growth estimate is based on solid domestic demand and better-than-expected performance of exports in the first half of 2022-23, it said. The report, titled “Navigating the Storm”, pointed out that India’s economy is relatively more insulated from global spillovers than other emerging markets.

It notes that the global outlook is subject to various downside risks, including intensifying geopolitical tensions, growing stagflationary headwinds, rising financial instability, continuing supply strains, and worsening food insecurity.

“For India, these headwinds will likely constrain private consumption and investment activity in the second half of 2022-23 and 2023-24. India’s exports are susceptible to a global growth slowdown. Moreover, since India is a net importer of critical commodities such as oil, elevated global prices will continue to weigh on domestic inflation, which is likely to constrain domestic activity. However, the risks from these adverse global spillovers will be somewhat balanced by India’s lower integration with the global economy – trade openness of India in terms of share of total trade as a percentage of GDP (close to 45% of GDP) and integration in global financial markets remain lower than its peers”, the report said.

The report also stated that at over $500 billion, India has one of the largest holdings of international reserves in the world and while the reserves have declined by about 13% this year, they still provide close to eight months of import cover, thereby easing the pressure on the Indian rupee compared to other emerging market economies.

The report says that while a 1 percentage point decline in the GDP growth rates of the US and Eurozone can result in a 0.4 percentage point decline in India’s GDP growth, the impact is at least 1.5 times larger for other emerging economies.

World Bank GDP estimates

India's GDP to grow 6.9% in FY23, says World Bank