Comments
Just on the very first day of the new fiscal, the Asian Development Bank has lowered the growth projection for 2014-15 to 5.5 per cent from its earlier estimate of 5.7 per cent.
However, this is better than 4.9 per cent growth estimate for 2013-14. In fact, the multilateral agency has upped its earlier projection for the fiscal year ended on Monday from 4.7 per cent. The new estimate is same what the Government has projected.
The agency has outlined new projections in its Asian Development Index, 2014, released on Monday. “India’s outlook depends on its ability to successfully implement structural reforms and spark stronger growth. If successful, reforms in India may accelerate economic growth from 4.9 per cent in 2013-14 to 5.5 per cent and 6.0 per cent in the next two years,” it said.
Growth constraints
It also added that the Indian economy is still operating below potential, as it remained constrained by slow industrial growth, contracting manufacturing output, weak investment, and a reduction in private consumption. It believed that India’s potential growth is 6 per cent.
CPI inflation
The report said consumer price inflation is likely to ease below double digits witnessed in recent years, but will continue to be high. It has projected the Consumer Price Index inflation to average 8.1 per cent in 2014-15 and moderate further to 7.8 per cent in 2015-16, assuming no adverse shocks to agriculture.
The inflation rate based on the new CPI has averaged 9.3 per cent during April-February. The Reserve Bank of India aims to bring down the inflation based on new CPI to 8 per cent by January 2015 and 6.0 per cent a year later.
WPI inflation
The inflation rate based on Wholesale Price Index is likely to average 6 per cent in the current financial year and 5.8 per cent next year, the report said.
“These projections assume that monetary policy will remain tight, as consumer price inflation, which has persistently trended higher than the wholesale price inflation, is increasingly viewed as the nominal anchor, making the inflation target of 2-6 per cent within the next two years a bigger reach,” it said.
Current account deficit
Current account deficit is expected to rise marginally to 2.5 per cent of GDP in the current financial year from the projected 2.2 per cent in 2013-14. This deficit is likely to widen further to 2.8 per cent in 2015-16, as import demand grows with improvements in investment and industry, it said.
According to the agency, one of India’s most pressing policy challenges is to create significantly more productive and well paying jobs, the report said.
“Such jobs are vital to sustain high growth and ensure it is inclusive. Manufacturing will have to play a key role in job creation as the proportion of the workforce that depends on agriculture declines and 12 million people enter the workforce each year,” the report said.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.