The World Bank on Wednesday lowered India’s growth forecast for the current fiscal year (2022-’23) to 8% from its previous estimate of 8.7% made in January. The financial body cited the impact on the global economy of Russia’s invasion of Ukraine as the reason behind the revision.

“In India, household consumption will be constrained by the incomplete recovery of the labour market and inflationary pressures,” the World Bank said in its bi-annual report for the South Asian region.

The World Bank also reduced its growth forecast for South Asia to 6.6% in 2022, down by one percentage point compared to the January projection.

World Bank Vice President for South Asia, Hartwig Schafer, said that governments in the region need to carefully plan monetary and fiscal policies to counter external shocks and protect the vulnerable.

“South Asia has faced multiple shocks in the past two years, including the scarring effects of the Covid-19 pandemic,” Schafer said. “High oil and food prices caused by the war in Ukraine will have a strong negative impact on peoples’ real incomes.”

In the report, the World Bank suggested that the impact of the Ukraine war on fuel prices could provide the region an impetus to reduce its dependence on fuel imports and move towards green energy.

“The introduction of green taxation can have multiple quantifiable benefits for South Asia, including improved energy security, environmental gains and increased fiscal revenues,” the World Bank Chief Economist for the South Asia Region, Hans Timmer, said. “These revenues could be utilized for adaptation against climate-related disasters and to strengthen social safety net systems.”

On March 30, credit rating agency India Ratings had lowered India’s growth projection for 2022-’23 to the range of 7% to 7.2%, from its previous estimate of 7.6% . On March 22, United States-based credit rating agency Fitch had also cut India’s growth forecast for the current fiscal year to 8.5% from 10.3%.