The latest Global Economic prospects report of the World Bank indicates that the Russian invasion of Ukraine has compounded the global economic slowdown caused by the COVID-19 pandemic, continuing the global economic slowdown.
The economy may enter a period of modest growth and high inflation for some time, according to the report World Bank on June 7 forecasted that global supply chain disruptions, Russia Ukraine conflict and rising inflation will pull down the growth rate of India to 7.5 percent in the current financial year. It had earlier forecasted India’s growth at 8.7 percent in FY 23. Notably this is higher than RBI’s forecast of 7.2 percent growth for FY 23.
However, the World Bank pegged India’s growth rate in FY24 at 7.1 percent, higher than its previous forecast of 6.8 percent. Though on a very contracted base, the Indian GDP grew 8.7 percent in FY 22.
World Bank in its report said that global growth is expected to slump from 5.7 percent in 2021 to 2.9 percent in 2022, which is significantly lower than 4.1 percent that was anticipated in January. “It is expected to hover around that pace over 2023-24,” the bank said. Drawing parallels to stagflation in 1970s, the World Bank said that several years of above-average inflation and below- average growth are in store for the world, particularly bringing disagreeable consequences for low and middle income countries.
Inflation in India
Retail inflation rate based on Consumer Price Index (CPI), on an annual basis raised to 7.79 percent in April 2022. Point to point rate of inflation based on the Consumer Price Index – AL (Agricultural Laboures) and CPI-RL ( Rural labourers) stood at 6.44% & 6.67% in April, 2022 compared to 6.09% & 6.33% respectively in March, 2022. The same inflation rate stood at 2.66% and 2.94% respectively during the April of the previous year.
World Bank on how to counter a possible Stagflation
In the reports foreword, World Bank President David Malpass urges policy makers to step up relief efforts and coordinate crisis response for people impacted by Russia-Ukraine conflict. He suggests countering the spike in oil and food prices by boosting the supply of key food and energy commodities. He calls to step up debt relief efforts and speed up the transition to low-carbon energy sources.
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