On Tuesday, The World Bank downgraded India’s real GDP growth forecast for the fiscal year 2022-23 (FY23) to 7.5% from 8% amid inflationary pressures, supply chain pressures and geopolitical tensions sparked by Russia’s invasion of Ukraine.

In its latest Global Economic Outlook report, the multilateral agency also lowered its global growth forecast for 2022 to 2.9% from 4.1%.

The World Bank said fixed investment from the private sector and government would support growth, and the government had introduced incentives and reforms to improve the business environment.

“Growth is expected to slow further to 7.1% in 2023-24, returning to its long-term potential,” it said. This is the second time the World Bank has revised its GDP growth forecast for India in FY23. In April, it lowered its forecast to 8% from 8.7%.

Rating agencies such as S&P and the International Monetary Fund (IMF) recently downgraded their forecasts for India’s FY23. The World Bank’s forecast of 7.5% is still slightly higher than the Reserve Bank of India’s (RBI) forecast of 7.2%.

The Indian economy will grow by 8.7% in 2021-22, making it the fastest-growing major economy globally. Output mainly comes from the agricultural sector and government final consumption expenditures.

On Wednesday, the Reserve Bank of India’s Monetary Policy Committee is expected to announce a cut in the repo rate by at least 50 basis points as inflation hits household savings and corporate profit margins. At the same time, the centre lowered excise taxes on petrol and diesel, imposed export restrictions on goods including wheat, and reduced tariffs on other goods to control prices.

Rising prices for everything from fuel and vegetables to edible oils pushed wholesale-price-index-based inflation to 15.08% in April and pushed retail inflation to a nearly eight-year high of 7.79%.

“After more than two years of the pandemic, spillovers from Russia’s invasion of Ukraine will sharply accelerate the deceleration in global economic activity, which is now expected to slow to 2.9% by 2022,” the World Bank said global growth.

The war in Ukraine has resulted in high commodity prices, increased supply disruptions, increased food insecurity and poverty, higher inflation, tighter financial conditions, heightened financial vulnerabilities and heightened policy uncertainty, the report said.

“Growth in emerging market and developing economies has been revised down to 3.4% this year, as negative spillovers from Russia’s invasion offset recent increases in energy prices in some commodity exporters,” the report said.