New Delhi [India], October 3 (ANI): Inclusion in JPMorgan's benchmark emerging-market index will let India access an increased pool of financing, said World Bank Senior Economist Dhruv Sharma, and added it was a signal of the country's importance in the global economy and financial markets.
"I think overall, it is a positive development we're expecting. We're expecting perhaps USD 25 billion worth of inflows, maybe even more at some point. Some of those inflows have already started," Sharma told ANI on Tuesday.
"This gives India access to an increased pool of financing and a more diverse pool of financing as well. So of course it comes with associated risks as well when it comes to volatility but overall, I think this is a this is a signal of India's importance in the global economy and financial markets," the senior economist added.
In a significant development that could pull foreign funds into India's debt market, JPMorgan ChaseCo. recently announced it will add Indian government bonds to its benchmark emerging-market index starting June 28, 2024. The inclusion of the index follows the Indian government's "substantive market reforms" for aiding foreign portfolio investments, the American multinational investment bank JP Morgan had said.
The inclusion of Indian government bonds in the JPMorgan Government Bond Index-Emerging Markets index could be seen as yet another sign of its growing appeal to global investors as it continues to remain one of the fastest-growing major economies.
Coming back to the World Bank, it 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, it observed that despite significant global challenges, India was one of the fastest-growing major economies in 2022-23 at 7.2 per cent.
"We are expecting growth to be underpinned by robust private investment, and we expect to see some strength in the services sector as well. The moderation and our number from last year's growth number which was 7.2 per cent is largely as a result of a moderating consumption and challenging external conditions," Sharma said.
World Bank today said South Asia is expected to grow by 5.8 per cent in the financial year 2023, but slower than its pre-pandemic pace and not fast enough to meet its development goals. The growth forecast for 2023 is 20 basis points higher than its April projection.
South Asia consists of the countries Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka.
The latest South Asia Development Update of the World Bank said growth in the region is expected to slow to 5.6 per cent in 2024 and 2025, as post-pandemic rebounds fade and a combination of monetary tightening, fiscal consolidation, and reduced global demand weigh on the economic activity.
"So India of course, is the largest economy and the growth outcome that we have for India will drive regional growth outcomes as well. Each country has its own unique challenges and strengths as well. India is no different. India over the last decade or so has improved its macro stability. It has,you know, developed ability to weather some of the challenges that emerge globally and we're expecting that strength to play out in regional numbers as well," Sharma said when asked about India's contribution to the overall South Asian economy.
Asked how do sees inflation in India and how will it impact growth, Sharma said,"Our expectation is that inflation will moderate this year and next year as well. To a certain extent, it is elevated. You know, over the past couple of months we have seen food prices spike. We believe that temporary phenomena and phenomena that are largely driven by weather patterns and supply chain disruptions. So we expect that inflation to come down within the Reserve Bank of India's comfort range of two to 6 per cent."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.
Franziska Ohnsorge, Chief Economist, South Asia Region, World Bank, speaking to ANI said, the urgent priority in the region should be on managing and reducing fiscal risks.
"The sort of main policy priority, the most urgent one across the region is to really manage and reduce fiscal risks. That is one of the critical sources of vulnerabilities around the region. In the longer run, it's about creating growth, the challenge is about creating growth, creating jobs and their private investment is really the weak spot around the region. It's the weak spot and that needs many things to go right. To improve private investment, business climates have to be right. Financial systems have to be strong, you need public investment and it helps if you have less restrictive relations with you -- with the outside world, fewer trade restrictions and fewer capital restrictions," Ohnsorge said. (ANI)