Answer on World Bank Report

Q.) Discuss the major highlights as mentioned by the World Bank in its recently released “Global
Economic Prospects” Report on the

A.) Indian Economy, and

B.) Global Economy

Ans:

The Washington DC headquartered multilateral development bank, World Bank, has recently
released its biannual report “Global Economic Prospects”. This report focuses on the resilient India’s
economy in 2023-24 and also projects the growth of Indian economy for FY25 & FY26. Along with
this, it stresses on the global economic situation.

The World Bank in its report quoted that India is the one of the fastest growing economy of 2023 so
far. This is attributed to high influx of foreign investments, strong consumer demand, robust
corporate and bank’s balance sheet, rise in Government expenditure, stable inflation, robust service
sector and amongst others. Let’s look at these factors in detail.

1. High Influx of Foreign Investments: 2023 proved out to the year with the highest inflow of FPI.
With more FPI coming into the Indian Financial markets, companies had leveraged this money and
improved their production, which resulted into the exorbitant profits of many corporations and
hence the increase in India’s GDP

2. Strong Consumer Demand: A country’s economy will not grow unless there is a consumer
demand. The demand was slightly low back then in 2020 due to fear amongst the consumer’s mind.
The lock demand in 2020 resulted in the declining of the GDP for that year. However, as the Covid-
19 pandemic has relaxed, there was a surge in the consumer demand, and hence India could see a
robust growth in GDP in Q3 of FY2023-24 which was pegged at 6.5%

3. Robust Corporate and Bank’s Balance Sheet: Robustness in the balance sheet of a corporate and a
bank is extremely crucial, as the former’s robustness will entice them to take more calculated risks
to increase the production and the revenue/profit, while the latter’robustness is needed so that they
could be able to lend freely to the standard borrowers without any fear. Spending by corporates and
lending by banks is extremely important for the Indian economy to sustained its growth, as
envisaged by the World Bank in its report

However, besides all this silver lining, there exists a decline in manufacturing sector which could be a
major concern going forward.

Due to all this factors, the World Bank predicts the Indian economy to grow at 6.3% in 2023, 6.4% in
2024 and 6.5% in 2025. As per the World Bank, the Indian economy has been performing better as
compared to the global economy.

The Global economy is facing with the lot of challenges like heightened geopolitical tensions,
slowdown in China’s economy, persistent High Inflation, weak external demand and high interest
rate. Considering all these factors, the World Bank has predicted the global GDP to grow at 2.6% in
2023.

Written By: Rahul Kopulwar Be Better

 Answer on World Bank Report

Let’s look at some of the factors that is behind this low global GDP projection.

1. Heightened Geopolitical Tensions: The recent ongoing war between Israel-Hamas has threatened
the global economy. The war has escalated between the two which has led to rise in the Crude oil
prices. Crude oil is the basic feedstock for many industries. With the rise of it, the inflation could be
seen in majority of the goods and services. This inflated prices of goods and services makes the good
unaffordable for the global community and hence, there is decrease in the growth of the global
economy.

2. Slowdown in China’s Economy: China is facing their worst real estate crisis, due to which their
economy has been devasted. As China being a major contributor in the global GDP, the projections
for the global economy has decreased from 3 % in 2022 to 2.6% in 2023

In conclusion, India’s projection of GDP by World Bank can be on the higher side if India could
maintain its inflation within range, focus on increasing the Government expenditure and balance
sheets of a corporate and bank are sustained. The growth in Global economy can be better than
predicted if the geopolitical issues come to an end. However, the time will only tell if the projections
by World Bank can be met or unmet.

Written By: Rahul Kopulwar Be Better