The World Bank  retained its FY22 growth forecast for the Indian economy to 8.3 per cent and upgraded it to 8.7 per cent for FY23 from 7.5 per cent estimated earlier, saying economic recovery is boosted by a reviving private capex cycle.

“India’s economy is expected to grow by 8.3 per cent in the fiscal year ending March 2022, unchanged from the June 2021 outlook. The forecast for FY2022-23 and FY2023-24 for India has been upgraded to 8.7 per cent and 6.8 per cent, respectively, reflecting higher investment from the private sector and in infrastructure, and dividends from ongoing reforms,” the Washington-based global lender said in its latest issue of Global Economic Prospects released today.

The growth outlook will also be supported by ongoing structural reforms, a better-than-expected financial sector recovery, and measures to resolve financial sector challenges despite ongoing risks, it said.

The World Bank said the economic damage caused by the second wave in India has already been unwound with output effectively back to levels reached prior to the pandemic levels. However, it added contact-intensive sectors such as trade and hotels are still below pre-pandemic levels.

The economy is likely to surpass the pre-pandemic level by growing at 9.2 per cent in the fiscal year ending March 31, 2022, after recovering from a historic contraction in the preceding year, as per the first Advance Estimates released by the National Statistical Office (NSO) last week.

The multilateral lending agency said consumer inflation in the major economies has been above central banks’ targets since late 2019. In India, easing supply disruptions related to Covid-19 and deficient demand contributed to price rise. “In most economies, monetary and fiscal policy are expected to remain broadly accommodative in 2022, but gradually move to a focus on fiscal sustainability and anchoring inflation,” it mentioned.

The development lender trimmed its forecasts for economic growth in the United States and China, mentioning high debt levels, rising income inequality, and the Covid-19 new Omicron variant threatened the economic recovery. Global growth is likely to decelerate “markedly” to 4.1 per cent in 2022 from 5.5 per cent  last year, and dip further to 3.2 per cent in 2023.

In its report, the World Bank sharply cut its forecast for US growth this year to 3.7 per cent, 0.5 points lower than its previous estimate, following the country’s 5.6 per cent expansion in 2021. However, for China, growth is now expected to slow to 5.1 per cent in 2022, from 8 per cent last year, reflecting the lingering effects of the pandemic.

It said: “The possibility of a marked and prolonged downturn in the highly leveraged property sector—and its potential effects on house prices, consumer spending, and local government financing—is a notable downside risk to the outlook.”