The World Bank expects India’s growth to pick up to 7.8 per cent in the next financial year, projecting it to be the fastest growing economy in the world for the next three years, riding on stronger domestic policy reforms.
In its report titled Global Economic Prospects, the World Bank has projected the growth in Indian economy to be higher than that of China, which is expected to grow at more modest 6.7 per cent. World Bank estimated world economy growth at 2.9 per cent.
However, the World Bank has marginally reduced India’s growth rate by 0.2 per cent in 2015 and 0.1 per cent in both 2016 and 2017. Despite this, India continues to be the bright spot of the global economy.
The report suggests that China is estimated to grow at 6.7 per cent in 2016 and 6.5 per cent each in 2017 and 2018 while Russia and Brazil are expected to remain in recession in 2016.
These estimates represent a downward revision from the projections made in June 2015.
With Bangladesh projected to grow at 6.7 per cent and Pakistan at 5.5 per cent, South Asia will be the world’s fastest growing region according to the report.
Among the other BRICS economies, the report says Russia’s economy is projected to shrink by 0.7 per cent in 2016 and Brazil’s by 2.5 per cent, due to sump in global commodity prices. South Africa’s economy is expected to grow very slowly at 1.4 per cent.
The report said India’s currency and stock markets were largely resilient over the past year, even during bouts of volatility in global financial markets.
While net Foreign Direct Investment (FDI) flows have remained in the positive territory, it said the Reserve Bank of India (RBI) has rebuilt reserves.
World Bank chief economist Kaushik Basu has said that a positive general mood is helping India and in turn investment climate.
WorldBank growth forecast 2017 Brazil1.4 Thailand2.4 Mexico3 Turkey3.5 Indonesia5.5 Philippines6.2 Vietnam6.3 India7.9 Ghana 8.2 Ethiopia9Advertisement
— Kaushik Basu (@kaushikcbasu) January 8, 2016
Growth 2015/16 Brazil -3.7/-2.5 Russia -3.8/-.7 Pakistn 5.5/5.5 Kenya 5.4/5.7 B’desh 6.5/6.7 China 6.9/6.7 India 7.3/7.8 Ethiopia 10.2/10.2
— Kaushik Basu (@kaushikcbasu) January 7, 2016
Narendra Modi-led NDA government is credited for the successful launch of auctions of coal blocks, telecom spectrum and FM radio licences. Diesel prices were deregulated, and so was cooking gas, with subsidies now being paid directly into consumer banks accounts.
According to Commerce & Industry Minister Nirmala Sitharaman, Modi government’s ‘Make in India’ campaign, which aims at transforming the country into a global manufacturing hub, has already made a “tremendous” impact on the investment climate as evidenced by the growth in FDI.
Modi government’s efforts to expand infrastructure spending should start to show results in the second half of the year. Coal shortages have reduced and reforms in the electicity sector should further increase the availability of power.
Centre’s steps to improve the business climate in India are adding up. In the World Bank’s Doing Business report for 2015, India’s rank has improved from 142 to 130.
In the outlook for emerging and developing economies, the World Bank report suggest South Asia to be a bright spot, with growth inching upwards to 7.3 per cent in 2016 from 7 per cent in the year just ended.
The report also mentioned that a weak growth among major emerging markets will weigh on global growth in 2016.
The World Bank raised its concerns over weakness most major emerging markets which it sees act as a deterrent for poverty reduction and shared prosperity.
The report warned that spillovers from major emerging markets will constrain growth in developing countries and pose a threat to hard-won gains in raising people out of poverty.
More than 40 percent of the world’s poor live in the developing countries where growth slowed in 2015.
Falling commodity prices, flagging trade and capital flows, and episodes of financial volatility sapped economic activity, were among the reasons for lower than expected global economic growth in 2015.
Robust growth in 2016 will depend on the stabilization of commodity prices and on continued momentum in high income countries.