World Bank maintains 7.5% GDP growth forecast for India in FY16

Our Bureau New Delhi | Updated on January 23, 2018 Published on October 29, 2015


HYDERABAD (AP) -27-08-2013 - BL / TUMBLING RUPEE : A petty exchanger of Rupee notes waits for customers outside the Reserve Bank of India in Hyderabad on Tuesday as the Indian Rupee slided to an all-time intra-day low of 65.94 per dollar with assets flowing back to the U. S. emerging economy. -PHOTO: P_V_SIVAKUMAR

Says acceleration will depend on public investments, exports picking up

The World Bank has maintained its growth forecast for India at 7.5 per cent for 2015-16, but marginally lowered the projections for 2016-17 and 2017-18 to 7.8 per cent and 7.9 per cent, respectively.

The projection is, however, more optimistic than by other agencies such as the International Monetary Fund, which has pegged India’s GDP (gross domestic product) growth at 7.3 per cent this fiscal.

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“While growth will very likely remain above 7 per cent in the next fiscal year, there is significant uncertainty about the momentum of the economy,” the World Bank said in its latest India Development Update, released on Thursday. While public investments have helped kick-start the investment cycle, it said further acceleration would depend on the investment rate picking up to 8.8 per cent over the next two financial years.

The earlier Update, released in April, had pegged GDP growth at 7.9 per cent next fiscal and at 8 per cent in 2017-18.

“Although India may be able to achieve fast GDP growth without export growth for a short period, sustaining high rates of GDP growth over a longer period will require a recovery of export growth,” it further said.

Reform areas

Though India is well positioned to weather the global volatility in the short term, the country will not remain immune to a slowdown in global demand and heightened volatility in the medium term, it noted. The World Bank also called for three crucial reforms in the economy to boost growth — improving the asset quality of banks; rolling out the goods and services tax (GST); and improving service delivery by States and local bodies.

“While progress is visible in several areas, including improvements in the ease of doing business, some key reforms, most notably the implementation of GST can be a potential game changer for India,” said Onno Ruhl, World Bank Country Director in India.

The challenges

Underlining challenges before the economy, the report said the government’s efforts to lower the fiscal deficit next year onwards beyond the targeted 3.9 per cent of GDP this fiscal may have limited impact. Global crude oil prices are unlikely to fall further, mounting payments from contingent liabilities from the infrastructure sector, and implementations of the Seventh Pay Commission report would take a toll on the finances.

‘Carbon tax’

Terming the additional levies of excise duty on petrol and diesel this year as “implicit carbon tax”, the World Bank said that pricing reforms have led to a reduction in emissions.

“The petroleum subsidy burden came down from 1.4 per cent of GDP in 2012-13 to 0.2 per cent in 2015-16, while excise duties for petrol and diesel increased by an average of 130 per cent in the fourth quarter of 2014-15 (year-on-year),” it said.

Published on October 29, 2015
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