Earlier this month, the International Monetary Fund (IMF) predicted the Indian economy would grow 5.9% in the 2023-24 financial year, down 0.2% from its January estimate, as it warned that turmoil in the financial system will hurt global growth.

“We reiterate that downside risks to our official forecast of 6.5% for real GDP growth in FY24 dominate upside risks,” India’s finance ministry said in a monthly economic review.

Factors such as potential risks from El Nino conditions could also lower agricultural output and impact prices, apart from geopolitical conditions, affecting growth and anticipated inflation, the review said.

However, the country is projected to be the world’s fastest growing economy in 2023/24 on the back of robust macroeconomic conditions.

These include easing inflation, improved current account deficit and a strong banking system.

The Indian finance ministry’s review also said the country’s banking system is less prone to incidents such as collapse of a few banks in the US and Europe owing to an interest rate tightening cycle.

“Banking supervision is robust with the Reserve Bank of India’s overarching coverage of institutions, regardless of asset size, in its bi-annual assessment of financial stability,” the review said.

Limiting banks’ investments in “held-to-maturity” securities to 23% of deposits insulates value of assets from adverse market developments, the government said.

Banks have suitable buffers against securities markets investment fluctuations.

US-based Silicon Valley Bank held bonds that they deemed to be held-to-maturity, or for longer durations, which lost value when interest rates increased, creating losses for the asset side of their balance sheet.