India needs to grow at 8% to achieve its goal of becoming a developed economy by 2047, and private investment needs to pick up to support it, the World Bank’s India country director, Auguste Tano Kouame, said on Tuesday.
The World Bank has, in its India Development Update released on Tuesday, kept India’s growth forecast for FY24 unchanged at 6.3% despite moderating consumption and challenging global environment.
“The 6.3% growth forecast for India is still going to be one of the highest growth rates among major economies in the world,” Kouame told ET in an interview. “So, India’s growth rate is very respectable.”
Resilient economy
Although high inflation and high interest rate environment are a downside risk to the forecast, he underlined the resilience of the Indian economy to global headwinds.
“India has been very resilient, one of the most resilient economies to the headwinds, whether there are headwinds from geopolitics or inflation of exchange rates,” he said, highlighting that the country has a comfortable level of foreign reserves to manage currency volatility. The World Bank has priced in oil at $90 per barrel as a baseline for its inflation and growth forecast.
The multilateral lender sharply revised the inflation outlook for FY24 to 5.9%, moving closer to the Reserve Bank of India’s upper band level.
Private investment focus
Kouame said conditions will remain conducive for private investment despite high inflation.
“Tapping public spending that crowds in more private investments will create more favourable conditions for India to seize global opportunities in the future, and thus achieve higher growth,” he said. Kouame pointed out that while public investment is necessary, it is not a sufficient condition to lure the private sector.
“In addition to public investment, you also need policies and reforms and regulations that make it easier and more attractive for the private sector,” he said.
Kouame said that India needs reforms to make it easier for the private sector to access land, skilled workers and easier for the micro, small and medium enterprises (MSMEs) to access credit.
Kouame observed that the economy would overcome the savings challenge as well, and noted that India should reach the investment-to-GDP ratio of 35%, for which savings in the country need to grow to 32% of the GDP. “I think savings are going to be higher, going forward, because people save when they can trust the banking system, and, in India, the financial sector is very strong,” Kouame said, highlighting that savings will pick up again.
