India is set to drive South Asian economic growth to a four-year high of 5.4 per cent in 2015, says a report by the United Nations (UN), giving part of the credit to the Narendra Modi Government’s move to reform the bureaucracy, labour laws and subsidies.
The pick-up in India’s growth in 2014 at an estimated 5.4 per cent, against 4.7 per cent in 2013, is “helped by government reforms that encourage consumption and investment”, the World Economic Situation and Prospects 2015 (WESP) report said adding “the recovery is partly the result of improved market sentiment after the new administration took office in the second quarter of 2014...”
India’s gross domestic product growth is projected to see a gradual acceleration at 5.9 per cent in 2015 and 6.3 per cent in 2016, the report said. Economic recovery in South Asia is, therefore, “expected to be led by a pick-up in growth in India, which accounts for about 70 per cent of regional output”, it added. Apart from India, Bangladesh and Iran are also projected to clock stronger economic growth in region.
Key challengesHowever, the key challenges flagged by the report are unemployment, the rise of vulnerable jobs and the fragility of the global economy. A broad-based downturn in emerging economies, particularly a sharp slowdown in China could also weigh on economic performance worldwide, it added.
“India, however, does not need to worry too much with its current account deficit gap narrowing and the rupee at stable rates since the past one year,” said Nagesh Kumar, head, ESCAP South and South-West Asia Office.
He said with global oil prices falling, this was the right time for India to remove fuel subsidies. Reform of labour markets, a step-up in infrastructure financing led by public investments, and creation of more decent jobs are some other steps that India could take, he said.
The global economy is expected to grow marginally at 3.1 per cent in 2015 and 3.3 per cent in 2016, compared with an estimated growth of 2.6 per cent in 2014, said the WESP report, which is produced at the beginning of each year by the UN Department of Economic and Social Affairs, the UN Conference on Trade and Development, the five UN regional commissions and the World Tourism Organisation.
Published on January 20, 2015
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