SME Times News Bureau | 09 Jan, 2020
In a report released on Wednesday, the World Bank said that
a lack of credit and drop in private consumption have led to a gloomy growth
outlook for India with a steep cut in growth rate for the current fiscal year
and only a modest gain projected for the next year.
According to the 2020 Global Economic Prospects report, the
World Bank said, "In India, [economic] activity was constrained by
insufficient credit availability, as well as by subdued private
consumption,"
India's growth rate is forecast to be only 5 per cent for
the current fiscal year, weighed down by a growth of only 4.5 per cent in the
July-September quarter, according to the 2020 Global Economic Prospects report
released on Wednesday.
The growth rate is forecast by the Bank to pick up to 5.8 per cent in the next
fiscal year and to 6.1 per cent in 2021-22.
India's growth rate was 6.8 per cent in 2018-19.
The 5 per cent growth rate projection for the current financial year is a sharp
cut of 2.5 per cent from the 7.5 per cent forecast made by the Bank in January
last year, toppling it from the rank of the world's fastest growing economy.
India's performance follows a global trend of lowered growth weighed down by
developed economies.
The report estimated world economic growth rate to be only 2.4 per cent last
year and forecast it to edge up 0.1 per cent to 2.5 per cent in the current
year.
Even with the lower growth rate of 5 per cent in the current fiscal year and
5.8 per cent forecast for the next, India holds the second rank among large
economies, behind only China with an estimated growth rate of 6.1 per cent for
2019 and 5.9 per cent this year.
The report blamed "weak confidence, liquidity issues in the financial
sector" and "weakness in credit from non-bank financial
companies" for India's slowdown.
The Bank predicated India's recovery to 5.8 per cent in the coming financial
year for India but "on the monetary policy stance remaining accommodative"
and the assumption that "the stimulative fiscal and structural measures
already taken will begin to pay off."
It also warned that acea sharper-than-expected slowdown in major external
markets such as United States and Euro Area, would affect South Asia through
trade, financial, and confidence channels, especially for countries with strong
trade links to these economies."
The Bank said that the growth of advanced economies was 1.6 per cent last year
and "is anticipated to slip to 1.4 per cent in 2020 in part due to
continued softness in manufacturing."
In contrast the growth of emerging market and developing countries is expected
to accelerate from 3.5 per cent last year to 4.1 per cent this year, the report
said.
In South Asia, Bangladesh is estimated to have the highest growth rate of 7.2
per cent in the current fiscal year, although down from 8.1 per cent last
fiscal year.
But its higher rgional growth rates are coming off a lower base with a per
capital gross domestic product of $1,698 compared to $2,010 for India.
Bangladesh is expected to grow by 7.3 per cent in the next financial year.
Pakistan's growth rate is estimated at only 2.4 per cent in the current fiscal
year and is projected to rise to 3 per cent in the next, according to the Bank.
The Bank blamed monetary tightening in Pakistan for a sharp deceleration in
fixed investment and a considerable softening in private consumption for the
fall in growth rate from 3.3 per cent in the 2018-19 fiscal year.
Sri Lanka's growth rate was estimated to be 2.7 per cent last year and forecast
to grow to 3.3 per cent this.
Nepal grew by an estimated 6.4 per cent in the current fiscal year and rise to
6.5 per cent in the next.