World Bank says India faces severe slowdown, cuts GDP forecast

GDP growth cooled for a fifth straight quarter to 5 per cent in the three months ended June, at the slowest pace since March 2013.

Published: 13th October 2019 05:00 PM  |   Last Updated: 13th October 2019 05:00 PM   |  A+A-

The World Bank (L) and a wholesale market in Delhi.

The World Bank (L) and a wholesale market in Delhi. (Photo | PTI and Bloomberg)

By Bloomberg

The World Bank cut India’s economic growth forecast by the most among South Asian nations on Sunday, below the outlook pegged by the nation’s central bank for this year, mainly because of a deceleration in domestic demand.

India’s gross domestic product growth is projected at 6% in the fiscal year started on April 1, compared with 7.5% forecast in April and 6.8% recorded a year earlier, the bank said in its latest South Asia Economic Focus report. Growth is expected to gradually recover to 6.9% in 2020-21 and to 7.2% in the following year, it said.

“India’s cyclical slowdown is severe,” the report said. The weakness is mostly due to a deceleration in local demand, according to the bank. “In such a weak economic environment, structural issues surface and the weak financial sector is becoming a drag on growth.”

ALSO READ: Is the world economy sliding into first recession since 2009?

Earlier this month, the Reserve Bank of India downgraded its economic growth projection by the biggest cut in its forecast in at least five years to 6.1% this year. GDP growth cooled for a fifth straight quarter to 5% in the three months ended June, at the slowest pace since March 2013.

Critical Situation

The critical situation demands decisive policy actions, and initial government steps point in the right direction, with the RBI embarking on an easing cycle and the government announcing a stimulus package recently, the World Bank report said. “All these measures will help to contain the downturn, but also raise concerns about fiscal space.”

“The main policy challenge is to address the sources of softening private consumption and the structural factors behind weak investment,” according to the report.

ALSO READ: More bad news as indicators suggest economy slowdown may linger in India

The main sources of risk include external shocks that result in tighter global financing conditions, and new defaults by non-banking financial companies triggering a fresh round of financial sector stress, the report said. To mitigate these risks, the authorities will need to ensure that there is adequate liquidity in the financial system, while strengthening the regulatory framework for NBFCs, it said.

The World Bank expects the South Asian economy to grow at 5.9% this year, lower by 1.1 percentage points from its April estimates. It also cut growth forecasts for Sri Lanka, Maldives and Bhutan, while raising those for Nepal and Bangladesh.


Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on are those of the comment writers alone. They do not represent the views or opinions of or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp