Despite global challenges and economic headwinds, India is continuing its growth trajectory, as the World Bank maintained its forecast for India's economic growth for the current fiscal year that started on April 1 at 6.3 percent.
According to the World Bank report, India's economy grew 7.8 percent in the first quarter of this financial year (April to June), a strong indication of the country's strong fiscal state and economic policies.
The report added that this quick growth during the first quarter was buoyed by strong services activity and robust demand.
In its report, the World Bank warned that food-price-driven inflation could dampen consumption in India but private investments and government spending are likely to be robust.
"An adverse global environment will continue to pose challenges in the short-term. 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," said Auguste Tano Kouame, World Bank's Country Director in India.
Weather conditions and inflation
The World Bank report added that adverse weather conditions have contributed to a spike in inflation in recent months in India. Headline inflation rose to 7.8 percent in July due to a surge in prices of food items like wheat and rice. Inflation is expected to decrease gradually as food prices normalize and government measures increase the supply of key commodities.
"While the spike in headline inflation may temporarily constrain consumption, we project a moderation. Overall conditions will remain conducive for private investment. The volume of foreign direct investment is also likely to grow in India as rebalancing of the global value chain continues," said Dhruv Sharma, Senior Economist at World Bank, and lead author of the report.
Strong PMI and favorable business operating conditions
On October 3, the Purchasing Managers' Index report released by S&P Global noted that India's PMI remained steady at 57.5 in October, thus signalling positive conditions for business operations.
Meanwhile, in August, while addressing the BRICS Business Forum Leaders' Dialogue in Johannesburg, Prime Minister Narendra Modi said that despite global challenges, India has emerged as the fastest-growing economy and will soon become a $5 trillion economy.
"Despite a shaky world economy, India has emerged as the world's fastest-growing major economy. India will soon become a $5 trillion economy," Modi said in his address.
