World Bank Raises India's GDP Growth Projection

World Bank Maintains India’s 2023-24 GDP Growth At 6.3%

The World Bank has retained India’s GDP growth forecast for the financial year 2023-24 at 6.3 per cent and noted that the country continued to show resilience against the backdrop of a challenging global environment.

The World Bank in its April report had cut India’s growth forecast for 2023-24 to 6.3 per cent from the earlier 6.6 per cent.

According to the World Bank’s latest India Development Update (IDU) released Tuesday, the international financial institution’s flagship half-yearly report on the Indian economy, observed that despite significant global challenges, India was one of the fastest-growing major economies in 2022-23 at 7.2 per cent.

“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,” World Bank said.

This fiscal, bank credit in India grew 15.8 per cent in the first quarter compared with 13.3 per cent in the first quarter of previous fiscal.

India’s service sector activity is expected to remain strong with growth of 7.4 per cent and investment growth is also projected to remain robust at 8.9 per cent.

“An adverse global environment will continue to pose challenges in the short-term, ” said Auguste Tano Kouame, World Bank’s Country Director in India.

“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.”

The World Bank expects that global headwinds will continue to persist and intensify due to high global interest rates, geopolitical tensions, and sluggish global demand and as a result, global economic growth is also set to slow down over the medium term.

About adverse weather conditions in India that contributed to a spike in inflation in recent months, World Bank in the report said the price rise is expected to decrease gradually as food prices normalize and government measures increase the supply of key commodities.

“While the spike in headline inflation may temporarily constrain consumption, we project a moderation. Overall conditions will remain conducive for private investment,” said Dhruv Sharma, Senior Economist, at the World Bank, and lead author of the report.

“The volume of foreign direct investment is also likely to grow in India as rebalancing of the global value chain continues.”

Headline inflation in India rose to 7.8 per cent in July due to a surge in prices of food items like wheat and rice, to later fall to 6.8 per cent in August.

Further, the World Bank expects fiscal consolidation to continue in 2023-24 with the central government fiscal deficit projected to continue to decline from 6.4 per cent to 5.9 per cent of GDP.

Public debt is expected to stabilize at 83 per cent of GDP. On the external front, the current account deficit is expected to narrow to 1.4 per cent of GDP, and it will be adequately financed by foreign investment flows and supported by large foreign reserves. (ANI)

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Muhammad Yunus: A Reformer or A Pariah

Myanmar is under military dictatorship since February 2021 when the army seized power in a coup. The unsavoury development that sent shock waves through the democratic world marked the end of a nearly decade of civilian governance in Myanmar, which is one of the poorest countries in the world. Expectedly but causing global outrage, the junta first detained her at home and then put the democratically elected Aung Suu Kyi in solitary jail confinement denying a frail lady medical care and right kind of food. The 78-year old woman seen as a symbol of democracy is nevertheless condemned to a jail term of 33 years after sham trial on charges ranging from corruption to violation of official secrets Act to unauthorized imports of gadgets.

The UN Security Council passed a resolution in December last calling for release of Suu Kyi and thousands of her followers. A host of countries, including the US, the UK and the European Union have imposed a number of sanctions, which, no doubt, are proving hurtful for the military regime. Now in an image improving move, the junta has reduced Suu Kyi’s prison sentence to 27 years from 33 years, as if the reduced sentence will ever again allow the politician to enjoy freedom.

If incarceration is the price Suu Kyi is paying for her campaign for democracy and human rights, there is a growing fear that the Bangladesh based economist widely known across the world whose ground level development work has lifted millions, the overwhelming majority being women who never had any access to bank credit or aware of their entrepreneurial skills, is not unlikely to meet the same fate as Suu Kyi.

Muhammad Yunus is facing a raft of allegations relating to tax evasions, receipt of funds from foreign sources without government clearances, tax evasions and violation of labour laws. What awaits Yunus will be known when the court completes hearing on the litany of charges against him. Incidentally, both Suu Kyi and Yunus are Nobel laureates. Suu Kyi getting the Nobel Peace award in 1991 for her non-violent struggle for democracy and human rights was a booster for those engaged in fighting autocracies and military regimes.

The same award was bestowed on Muhammad Yunus and his path breaking venture Grameen Bank in 2006 for their work to “create economic and social development from below.” But as the experience of Suu Kyi and Yunus will show a Nobel is no guarantee against persecution and harassment by the powers that be in some parts of the world.

Even in India, the management of central varsity Visva-Bharati will not stop complaining that Professor Amartya Sen (1998 Nobel economics laureate) whose maternal grandfather Kshitimohan Sen worked closely with Rabindranath Tagore in building the university has remained in “illegal occupation” of some land at Santiniketan in West Bengal. Is all this not happening because Professor Sen has remained steadfast in criticizing most New Delhi policies and persecution of minority communities?

Let’s see where the three countries stood in Press Freedom Index 2022 compiled by Reporters Sans Frontieres: India came 161 among 180 countries in 2022; the same year Bangladesh was at 162; and Myanmar was at a disparaginglyl low of 176. Across the world Press freedom is atrophying. But alarmingly more so in some countries helmed by illiberal regimes. We have recently seen attempts of muzzling and harassment of a group of Delhi based senior journalists after they published a report on Manipur based on a visit to the highly disturbed north-eastern state and interviews.

Enraged by the report saying that there are “clear indications that the leadership of the state became partisan during the conflict,” the police filed criminal charges against the journalists, including Editors Guild president Seema Guha for misrepresentation of facts. Whether it is Bangladesh or India, the democratically elected leaders at all levels are becoming increasingly sensitive to criticism that befit rulers seizing power by force or by staging coups. Democracies are expected to nurture civil society instead of circumscribing its space. But the culture of free debate, criticism based on facts allowing a hundred ideas (with apologies to Chinese Communist Party campaign of 195657) to flourish is fast disappearing in many places.

Not only that, the once celebrated social enterprises – Yunus earned celebratory status by championing the sector and running a global campaign that big companies should also have a social business on the side where the motivation will not be to earn profits but do good to those left out of development – and non-governmental organisations (NGOs) no longer find favour with the government. Over the years, many social businesses in developing countries have grown in size, become profitable and social influencers making them target for the politician-bureaucrat nexus to seek to control them. More and more NGOs are coming under scrutiny and their licence renewals are either postponed inordinately or denied. The worst happens as Yunus is experiencing if at any point social entrepreneurs betray political ambition. They may renounce that desire at some stage, but still they will remain suspect in the eyes of the authorities.  

Why is prime minister Sheikh Hasina Wajed so hateful of Yunus – she doesn’t stop calling him names besides “bloodsucker” of the poor charging them extortionist interest rates – even long after removing him from the office of CEO of Grameen Bank in 2011? Isn’t it because Yunus dabbled in politics in 2007, however briefly that might have been when Bangladesh was under military rule and Hasina was in detention? The perception remains with Awami League and its supreme leader that he was propped up by the US and would do things to enable it to control the Bay of Bengal.

Yunus is painted as the villain for the World Bank reneging on the funding of the country’s most ambitious infrastructure project, a bridge on the river Padma linking southern districts with Dhaka, in 2012. In recent times, the economist had had occasions to tell the Press that he was not cut out to be in politics. Moreover, at 83 he cannot be imagined as a political risk.

ALSO READ: Food Security – Is Bangladesh Already There?

That, however, will not wash with Hasina government. Instead of getting any relief from the daily agony, Yunus is experiencing a rise in his persecution. The trigger for his troubles started over a decade ago when a Norwegian documentary alleged that the donations that Grameen Bank received from an aid agency in the Nordic country in the 1990s were diverted to a sister organization and then brought back as loans. In subsequent investigation by the Norwegian government nothing incriminating was, however, found. But then, according to Awami League government, Yunus has to clear himself of many other grave charges in the court of law. As it would be the case, global leaders, including former US President Barack Obama, former UN Secretary-General Ban Ki-moon and over 100 Nobel laureates have told Sheikh Hasina in an open letter that “one of the threats to human rights that concerns us in the present context is the case of Nobel Peace Prize laureate Professor Muhammad Yunus. We are alarmed that he has recently been targeted by what we believe to be continuous judicial harassment.”

At the same time, a UN rights office spokesperson complains that “Yunus has faced harassment and intimidation for almost a decade… While Yunus will have the opportunity to defend himself in court, we are concerned that smear campaigns against him, often emanating from the highest levels of government, risk undermining his right to a fair trial and due process in line with international standards.” All this appeal is not, however, going to cut ice with Dhaka. The country’s law minister Anisul Huq while dismissing all such submissions as “unwarranted” sees these as “external interference in the country’s judiciary.”

Whatever happens to Yunus, the posterity will remember him for making microfinance available to millions of Bangladeshis, the overwhelming majority of them being women earlier never considered creditworthy. He can take credit for making poor women entrepreneurs by giving them small loans, which they make it a point to return. In an interview with Harvard Business Review published in December 2012, Yunus said: “Women used to hold less than 1% of bank loans in Bangladesh. So when I created Grameen, I wanted to make sure that half of the borrowers were women. But when we approached them, they said, ‘I don’t know what to do with money. I’m afraid of money. Give it to my husband.’ And I thought, ‘This is not the voice of the women. This is the voice of history, of the system, which created fear in their minds… We saw that woman borrowers brought so much more benefit to their families. Women want to build up something for the future with their money. Men want to spend it enjoying themselves. So we changed our policy to focus on women.”

It also goes to his credit that seeing how quickly microfinancing took roots in Bangladesh and liberated millions from poverty, illiteracy and bad health, many developing countries, including India replicated the programme with varying degrees of success.

When HBR wanted Yunus to react to the statement that “microfinance has also come under fire in recent years, he was blunt in saying: “The problem is not microcredit. It’s using the idea for the wrong purposes. Some programmes in India treated microcredit as an opportunity to make money. They blew it up and went to the stock market to float IPOs and so on. And that created all the tension… In some places even the loan sharks call their services microcredit. But we have no problem at Grameen Bank in Bangladesh, because microcredit has remained mission-driven. We want to help poor people. We don’t see them as an object for making money.”

Now Grameen Bank is firmly under government control. Yunus is old and there is no question of his again be associated with the organisation he created from scratch in any capacity. But let him not be hounded any longer. Let Dhaka listen to what world thought leaders are saying. Allow Professor Yunus to spend the rest of his life in dignity and peace.

China Acting As An Impediment To Sri Lanka’s IMF Deal

The uncertainty and lack of clarity regarding the extent and time frame of China’s restructuring of its debt to Sri Lanka are delaying Sri Lanka’s bailout package from the IMF, according to Asian Lite.

Debt restructuring is one of the prerequisites of the IMF’s bailout package for Sri Lanka. The process is, however, getting delayed due to Sri Lanka’s dire situation and a delay in concrete commitment from China, the island nation’s largest bilateral lender. Sri Lanka seems to be missing its December deadline.

According to the Opposition legislator from the Tamil National Alliance, Shanakiyan Rasamanickam, China is acting as an impediment to Sri Lanka’s IMF deal and has been paying bribes to force down unnecessary projects.

“If China is truly Sri Lanka’s friend, ask the Chinese to help with the [debt] restructuring and the IMF programme.” Referring to Rajapaksa-era mega infrastructure projects in Hambantota and Colombo funded by the Chinese, the Batticaloa MP, as quoted by Asian Lite, said: “That is not China being Sri Lanka’s friend, that is China being Mahinda Rajapaksa’s friend.”

The Chinese Embassy refuted the allegations and claimed that bilateral negotiations are on after working teams of different Chinese banks visited the island nation. Rasamanickam’s allegations are incorrect, said the embassy.

The Chinese investments under the BRI and bilateral projects with other countries have always been seen with suspicion for their lack of economic feasibility as well as debt-creating potential. Now as Sri Lanka is negotiating with China for debt restructuring and China has claimed to have shown readiness for restructuring its debt to Sri Lanka, “It will be the first time a major Asian Belt and Road Initiative borrower is going through the process… China’s approach to Sri Lanka’s debt restructuring and the extent of debt relief offered will set a precedent for China’s role and behaviour in other countries as well,” said the research report, according to Asian Lite.

Another country, Djibouti, at the heart of China’s multibillion-dollar “Belt and Road Initiative,” is struggling under mounting financial pressure and has suspended debt repayments to China, its main bilateral creditor, reported European Times.

Djibouti, a tiny nation at the intersection of the Red Sea and the Gulf of Aden, owed a total of USD 2.68 billion to external creditors at the end of 2020, according to the World Bank.

The African country struggling to repay Chinese loans has brought criticism to the Chinese model of project financing for creating dept traps for developing countries.

In its latest report on Djibouti, the World Bank stated that in 2022, Djibouti’s debt servicing costs tripled to USD 184 million from USD 54 million in 2021. A further increase to USD 266 million has been predicted for 2023.

The International Monetary Fund (IMF) after considering the sharp projected increase in Djibouti’s external debt servicing, in late 2021, declared Djibouti’s debt as being unsustainable. (ANI)

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India's GDP Growth Forecast

World Bank Revises India’s GDP Growth Forecast To 6.9%

The World Bank has revised India’s 2022-23 GDP growth forecast upward to 6.9 percent from the earlier estimate of 6.5 percent, due to robust economic activities according to Dhruv Sharma, Senior Economist at the World Bank.

India’s real GDP growth is expected to be at 6.9 percent in FY22-23 compared to 8.7 percent in FY21-22, according to World Bank’s latest India Development Update.

“India is more resilient now than it was 10 years ago. All steps taken over the past 10 years are helping India navigate the global headwinds,” Sharma, senior economist at the World Bank said.

He added that India’s economy has rebounded fairly robustly following the contraction that occurred during the pandemic year. “This story of the rebound has been driven largely by robust domestic demand” said Sharma.

World Bank, in its October report, lowered India’s 2022-23 growth rate from its June forecast, by 1 percentage point to 6.5 percent. In the previous report, the international organisation had projected India’s growth rate to be at 7.5 percent for the period.

CPI-based retail inflation is showing signs of moderation, according to government data, however, still remains above the central bank’s upper tolerance level of 6 percent since January this year.

The inflation fell to 6.77 percent in October from 7.41 percent in the preceding month. Easing prices in food baskets were the reason for the decline.

“India’s economy has been remarkably resilient to the deteriorating external environment, and strong macroeconomic, fundamentals have placed it in good stead compared to other emerging market economies,” said Auguste Tano Kouame, World Bank’s Country Director in India. “However, continued vigilance is required as adverse global developments persist,” he said.

The report forecasts that the Indian economy will grow at a slightly lower rate at 6.6 percent in the 2023-24 fiscal year. A challenging external environment will affect India’s economic outlook through different channels. The report states that rapid monetary policy tightening in advanced economies has already resulted in large portfolio outflows and depreciation of the Indian Rupee while high global commodity prices have led to a widening of the current account deficit.

India’s external position has also improved considerably over the past decade. The current account deficit is adequately financed by improving foreign direct investment inflows and a solid cushion of foreign exchange reserves. (ANI)

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77 anniversary of Independence India Rupee

Rupee Fared Better Among Emerging Mkt Currencies: World Bank

Indian Rupee has fared relatively well in 2022 in comparison to other emerging market peers, senior World Bank economist Dhruv Sharma said Tuesday after the global financial body revised India’s GDP forecast to 6.9 percent.

“The Rupee has depreciated just about 10 percent over the course of this year. That might sound like a large number, but relative to many other emerging market peers, India hasn’t fared that badly,” Sharma told a press briefing today after the launch of the World Bank’s India Development Update titled “Navigating the Storm”.

For the record, the rupee has come substantially off its all-time low. Currently, it is trading around 82.0 against the US Dollar as against a record low of 83 it breached in mid-October. Tightening monetary policy by the US Federal Reserve and central banks in other advanced economies triggered the depreciation of the Indian currency.

An increase in policy rates in the US and other advanced economies typically leads to a depreciation of the Rupee.

The US Federal Reserve has been raising key interest rates in its fight against red-hot inflation in the country. It raised the key policy rate by 75 basis points to over a decade high at 3.75-4.0 percent, the fourth consecutive hike of such magnitude.

Back home, the Reserve Bank of India had already hiked the key policy rate by 190 basis points since May to 5.9 percent to cool off domestic retail inflation that has stayed above the RBI’s upper tolerance limit for over three quarters now.

The World Bank has revised India’s 2022-23 GDP growth forecast upward to 6.9 percent from the earlier estimate of 6.5 percent, due to robust economic activities.

“India is more resilient now than it was 10 years ago. All steps taken over the past 10 years are helping India navigate the global headwinds,” said Sharma.

“Indian economy has rebounded fairly robustly following the contraction that occurred during the pandemic year. India performed quite well relative to other large emerging market economies, and this story of the rebound has been largely driven by robust domestic demand, and consumption investment,” the World Bank economist said.

On rising inflation in India, Sharma said it was driven by the supply side as well as external factors.

In October, retail inflation was 6.77 percent as against 7.41 percent the previous month. (ANI)

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World Bank Lower India’s 2022-23 Growth Rate To 6.5%

World bank, in its latest report, has lowered India’s 2022-23 growth rate from its June forecast, by 1 percentage point to 6.5 percent. In the previous report, the international organization had projected India’s growth rate to be at 7.5 percent for the period.

In the latest South Asia Economic Focus, Coping with Shocks: Migration and the Road to Resilience, released today, the World Bank has revised India’s growth rate down from its June forecast. It further expects India to grow at 7 percent and 6.1 percent in 2023 and 2024 respectively.

The twice-a-year update has also revised the regional growth rate of South Asia by 1 percentage point from the June forecast to 5.8 percent, as it expects a “dampening” growth rate in the region.

The main reasons highlighted for the revision have been Sri Lanka’s economic crisis, Pakistan’s catastrophic floods, a global slowdown, and the impacts of the war in Ukraine on top of the lingering scars of the COVID-19 pandemic.

“Pandemics, sudden swings in global liquidity and commodity prices, and extreme weather disasters were once tail-end risks. But all three have arrived in rapid succession over the past two years and are testing South Asia’s economies,” said Martin Raiser, the World Bank Vice President for South Asia.

“In the face of these shocks, countries need to build stronger fiscal and monetary buffers, and reorient scarce resources towards strengthening resilience to protect their people,” Raiser added.

However, the release has also highlighted the fact that India, which happens to be the region’s largest economy, recovered more strongly than the world average riding on the exports and service sector. It considers India’s “ample” foreign reserves to be serving as a buffer to external shocks.

While talking about Sri Lanka, the Report expects the country’s real GDP to fall by 9.2 percent this year and further by 4.2 percent in 2023. It considers the impact of COVID-19 and rising commodity prices due to the war in Ukraine to have worsened the situation and exacerbated its woes in debt and depleting foreign reserves.

While talking about Pakistan, the Report considers the high-commodity prices to have worsened Pakistan’s external imbalances and brought down its reserves. It finds Pakistan’s outlook subject to significant uncertainty after the devastating climate-change-fuelled floods submerged one-third of the country this year.

The release also considers that tourism’s return is helping drive growth in the Maldives and Nepal to a lesser extent.

The report expects the inflation in the region to rise to 9.2 percent this year before gradually subsiding. It highlights the main causes behind this as the elevated global food and energy prices and trade restrictions that have worsened food insecurity in the region. It calls them to have severely impacted the poor by squeezing their real income.

The report also talks about the impact of COVID-19 restrictions on the migrant workers of South Asia, who were disproportionately affected.

However, the report also considers migration as a crucial factor in facilitating recovery. It expects the migration flow to move from the areas hit hard by the pandemic to those that were not. It will supposedly equilibrate the demand and supply of labor.

“Labor mobility across and within countries enables economic development by allowing people to move to locations where they are more productive. It also helps adjust to shocks such as climate events to which South Asia’s rural poor are particularly vulnerable,” said Hans Trimmer, the World Bank Chief Economist for South Asia.

“Removing restrictions to labor mobility is vital to the region’s resilience and its long-term development,” Timmer added.

The report also offers two recommendations in its report. Firstly, it recommends cutting costs faced by migrants. Secondly, it suggests that policymakers de-risk migration including more flexible visa policies and social protection programs. (ANI)

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WFP, UN Express Concern Over Food Insecurity In Afghanistan

World Food Program (WFP) and the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA) in Afghanistan condemned the ongoing economic crisis in Afghanistan as people in the country are on the brink of starvation and facing poverty.

In a tweet, OCHA in Afghanistan wrote, “19M people are facing food insecurity, 25M people are living in poverty, 5.8M people are in protracted internal displacement, thousands of houses damaged by floods and earthquakes,” expressing concerns about the plight of Afghans, TOLOnews reported.
“To survive the winter, they require food, nutrition support, warm clothing & a roof over their heads,” tweeted OCHA.

Meanwhile, World Food Program has also raised concerns about the economic crisis in Afghanistan.

“The economic crisis wiped out jobs, salaries & livelihoods across Afghanistan, helping families & communities support themselves is more important than ever,” wrote WFP on Twitter.

According to a survey, “nearly all Afghans (94 per cent) rate their lives poorly enough to be considered suffering” since the Taliban’s takeover of the country with a population of around 40 million, reported TOLOnews.

The rising crisis in Afghanistan has hit small enterprises the hardest and private companies have laid off more than half of their employees due to a shortage in sales and a drastic decline in the consumer demand for the products.

Moreover, millions of Afghans are on the brink of starvation as the country reels from a humanitarian crisis.

According to a World Bank statement, Afghanistan’s per capita income has fallen by around 1/3 during the fourth quarter of 2021, wiping the country’s economic progress achieved since 2007. The aid-depended services sectors have been affected by the ongoing political instability, leading to a collapse in urban employment and incomes.

Meanwhile, women and girls “have been pushed to the sidelines”, Griffiths added. Rights gains have been reversed, and adolescent girls have not attended school in a year.

After the Taliban seized power following the hasty withdrawal of US soldiers, the international community froze Afghanistan’s assets and withheld help.

According to the International Labour Organization, more than 500,000 Afghan workers lost their jobs in the third quarter of 2021, and the number of people who will lose their jobs since the Taliban took control is expected to reach 700,000 to 900,000 people by mid-2022, Khaama Press reported. (ANI)