The international financial institution, in its report, said India continues to show resilience against the backdrop of a challenging global environment.

India Development Update (IDU), the World Bank’s half-yearly report on the Indian economy, observes that despite significant global challenges, India was one of the fastest-growing major economies in FY22-23 at 7.2 percent.

“India’s growth rate was the second highest among G20 countries and almost twice the average for emerging market economies. This resilience was underpinned by robust domestic demand, strong public infrastructure investment and a strengthening financial sector. Bank credit growth increased to 15.8 percent in the first quarter of FY23-24 compared with 13.3 percent in the first quarter of FY22-23,” the World Bank said.

The IDU expects that global headwinds will continue to persist and intensify due to high global interest rates, geopolitical tensions, and sluggish global demand.

“In this context, the World Bank forecasts India’s GDP growth for FY23-24 to be 6.3 percent. The expected moderation is mainly due to challenging external conditions and waning pent-up demand. However, service sector activity is expected to remain strong with growth of 7.4 percent and investment growth is also projected to remain robust at 8.9 percent,” the World Bank said.

According to the World Bank, adverse weather conditions contributed to a spike in inflation in recent months.

“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,” the update said.