World Bank Highlights India's Resilience to Global Energy Shocks
The World Bank stated on Thursday that India is well-positioned to navigate the current global energy shocks, with risks being "cushioned by ample buffers." These buffers include high foreign exchange reserves, significant fiscal space, and a well-capitalised banking system. The multilateral lender projected an average growth rate of 7.1% for India during the fiscal years 2028 and 2029.
Revised Growth Forecast and Economic Assessment
This assessment follows the World Bank's recent revision of its growth forecast for India in FY27, raising it to 6.6% from 6.3%. Aurelien Kruse, the World Bank's lead economist for India, emphasized that this upward revision is a testament to the strong buffers India had during the crisis. He noted that the authorities have struck a right balance in managing supply without resorting to massive rationing. Kruse acknowledged that risks remain substantial but are tilted to the downside, indicating cautious optimism.
Trade Agreements and Export Potential
The World Bank expressed optimism regarding India's recent trade agreements with the European Union and the United Kingdom. Franziska Ohnsorge, the South Asia chief economist at the World Bank, highlighted that these agreements are expected to provide a sustained boost to exports, reduce prices, and support household incomes across various income groups. She projected that these trade deals could significantly expand market access, potentially increasing the share of global GDP accessible through preferential trade from below 20% to nearly 38%.
Industrial Policy and Job Creation Challenges in South Asia
Commenting on the industrial policies in South Asia, the World Bank observed that countries in the region have been using such policies over the past decade to create more and better jobs, particularly in the manufacturing sector. However, the track record has been mixed. Ohnsorge pointed out that inward-restricting policies have significantly limited imports over several years, but export-promoting policies have not substantially boosted exports.
At an event organised by the National Council of Applied Economic Research (NCAER), Ohnsorge noted that it is becoming "harder" for countries in South Asia to generate more and better jobs. She highlighted that approximately 280 million young people are expected to join the workforce in the next 10 to 15 years, underscoring the urgency of addressing employment challenges.
Recommendations for AI Adoption and Economic Growth
To tackle these challenges, Ohnsorge suggested that countries should remove obstacles in the adoption of artificial intelligence (AI). By enabling businesses to make productive use of AI, it could lead to the creation of more jobs and drive economic growth. This recommendation aligns with the broader goal of leveraging technology to enhance productivity and employment opportunities in the region.
