The World Bank has downgraded India’s GDP forecast due to a decrease in domestic demand.
“India’s cyclical slowdown is severe,” the report said, according to Bloomberg. “In such a weak economic environment, structural issues surface and the weak financial sector is becoming a drag on growth.”
The report follows the Reserve Bank of India’s (RBI) move earlier this month to cut its economic growth projection to 6.1 percent this year — the biggest downgrade in at least five years. In addition, GDP growth decreased for a fifth straight quarter to 5 percent in the three months ending in June, which is the slowest pace in six years.
The report noted that initial policy changes should help “contain the downturn,” adding that “the main policy challenge is to address the sources of softening private consumption and the structural factors behind weak investment.”
Just last week it was reported that the country’s biggest festive season, which runs from the start of October until the end of November, had failed to revive the economy. Although eCommerce sales in India had a $3 billion gross merchandise value (GMV) during the six-day festive sale — 30 percent higher than last year — it was well below the 93 percent increase from 2017 to 2018. In fact, the first six months of 2019 showed weak sales for both Amazon and Flipkart in India.
“Overall, 2019 has been a slow year for eCommerce,” explained analyst Satish Meena. “Two things are clear, though. One is that there remains a big opportunity for eCommerce in India. Second, consumers from smaller cities and towns are increasing their online spending.”
In addition to its predictions for India, the World Bank also noted that the South Asian economy is expected to grow at 5.9 percent this year, while it cut growth forecasts for Sri Lanka, Maldives and Bhutan, and raised it for Nepal and Bangladesh.