Lifted by the prospects of faster implementation of reforms and a favourable terms-of-trade shock, India is expected to weather global volatility with real GDP growth projected to increase to 7.5 percent despite a weak export recovery, the World Bank has forecast.
Confirming India as the fastest growing among large economies in the world, the bank in its latest report projects the country to grow by 8 per cent by 2017/18.
With China gradually transitioning into an environment of lower growth, India could durably occupy the top growth spot among large emerging markets, it said.
In its latest South Asia Economic Focus Fall 2015, the WB said, “Lifted by the prospects of faster implementation of reforms and a favourable terms-of-trade shock”, the Indian economy has remained on a path of modest acceleration? As reflected in improvements in investments, and industrial output.
However, the delay in implementing key reforms on the domestic front, a weak trade performance and the recent slowdown in rural wage growth pose risks to growth, it said.
The terms-of-trade shocks are identified based on their impact on commodity prices, global manufactured prices, and global economic activity.
Economic activity in India, the bank said, is expected to accelerate gradually, on the back of improved industrial activity, a continued revival of the investment cycle and resilient consumption.
“India is expected to weather global volatility in 2015/16, with real GDP growth projected to increase to 7.5 per cent despite a weak export recovery,” the bank said.
Public investments are expected to accelerate, in line with the government’s stated focus on enhancing infrastructure investments, and start crowding in private investments.
With the expected upward momentum in investment, the overall growth momentum can gradually reach 7.9 per cent in 2017/18. Private consumption may also receive a fillip from the imminent civil service pay revisions and is expected to grow by 8 per cent by 2017/18.