The World Bank said in its twice-yearly South Asia Economic Focus Reshaping Norms: A New Way Forward, released on Wednesday in the run-up to the World Bank IMF Spring Meetings, that India’s growth will be 8% this fiscal year (April 1-March 31) and 7.1 percent the following fiscal year (FY 2023-24). The country is predicted to have risen at an annual rate of 8.3 percent in the fiscal year recently ended, after contracting by 6.6 percent the year before due to the COVID-19 epidemic.
Growth in the South Asia area is predicted to be 1 percentage point slower than projected, at 6.6 percent in 2022 and 6.3 percent the following calendar year. This is owing to Russia’s war on Ukraine, which has had an impact on the area at a time when it was already dealing with “uneven and fragile” growth, rising commodity prices, supply constraints, and banking sector vulnerabilities. According to the research, the war’s impact thus far has been increased inflation, deteriorating current account balances, and expanding fiscal deficits.
Shocks from outside
“In light of these challenges, governments must carefully plan monetary and fiscal policies to counter external shocks and protect the vulnerable, all while laying the groundwork for green, resilient, and inclusive growth,” said Hartwig Schafer, World Bank Vice-President for South Asia, in a press statement.
On a conference call with reporters on Wednesday, Hans Timmer, World Bank Chief Economist for South Asia, said there is little room for fiscal stimulus, and supply bottlenecks are more important than lack of effective demand.
When asked about the impact of Russian sanctions on the South Asian region, Mr. Timmer indicated the impact would be indirect rather than direct, owing to the low share of imports and exports to and from Russia and Ukraine. The sanctions’ global influence on commodity and financial markets had an indirect impact.
Despite “strong” GDP growth during the recovery, all nations in the area will confront problems, according to the analysis. Due to the labor market’s incomplete recovery and inflationary pressures, household consumption in India will be restricted.
Fuels that are more environmentally friendly” World Bank
As a result of increased fuel prices and the imposition of green levies, the report suggests that countries in the region are moving toward greener fuels and commodities. This would also provide the government with a new stream of revenue.
When challenged by The Hindu about why the World Bank was supporting taxing fuel usage when prices were already high, Mr. Timmer said the green tax idea applied to both polluting firms and energy costs.
Mr. Timmer stated, “Supporting needy households by subsidizing energy is extremely inefficient.” “The money can be much better utilized when the proper price for energy is paid and then divided in a way that actually targets the poor homes,” he added, emphasizing that this was a long process that would not be completed “soon.”