World Bank: India’s GDP Growth to Remain Strong

Describing the South Asian world as a global growth hotspot in its latest report on South Asia Economic Focus released yesterday, the World Bank has stated that India’s GDP growth will remain strong at 7.6 percent in 2016 and 7.7 percent in 2017 supported by civil service pay reforms supporting consumption, expectations of a rebound in agriculture, increasingly positive contributions from exports and a recovery of private investment in the medium-term.But, the biannual report said that India faces the obstacle of further speeding up the responsiveness of poverty reduction to growth, promoting inclusion, and extending gains to a wider range of human development outcomes associated with health, nutrition, education and gender.

South Asia – Global Growth Hotspot

According to the report, South Asia has proved to be resilient to external headwinds like China’s slowdown, uncertainty around stimulus policy in the advanced economies, and slowing remittances. The main obstacles remain domestic and envelope policy uncertainty as well as financial and fiscal vulnerabilities.In Pakistan, economic activity is projected to eventually accelerate over the medium-term reaching 5 percent in 2017 and 5.4 percent in 2018, building upon 4.7 percent GDP (Gross Domestic Product) growth at factor cost in 2016 (5.7 percent at market prices).In Bangladesh, growth has remained robust in spite of internal and external headwinds, it said. Growth shall be sustained at 6.8 percent in 2017, coming down slightly from 7.1 percent in 2016, the report added.On India, the report said that the economic growth remained robust, which as in the past, is expected to support continued reduction in poverty. The report said that this year is expected to witness some convergence in the rural and urban economies, supported by stimulating policies like passage of GST and civil pay revisions, along with the good monsoons. Re-balancing of growth movers shall in turn support the sustainability and inclusiveness of Gross Domestic Product (GDP) and household income growth moving forward, it said. Positivity on the growth front is required to be balanced with caution while translating to broad-based poverty reduction.The report said that in spite of the recent success in poverty reduction, profits have been uneven, with greater progress in the states and social groups which were already better-off.The report said that India was facing the challenge of further speeding up the responsiveness of poverty reduction to growth, enforcing inclusion of currently excluded groups (like women and scheduled tribes), and extending benefits to a broader range of human development outcomes associated with nutrition, health, education and gender, where the nation continues to rank poorly.

The Negative Aspects:

The report also marked significant downside risks in the near term:Firstly, continuous uncertainties in the global environment, volatility in the commodity prices, wider spillovers from Brexit on the world trade, and a further slowdown in China’s economy, could further delay a revival of external demand, it cautioned.Secondly, it said that the government had set ambitious targets for raising revenue from divestments and the spectrum auctions. If these were not met, there was a risk that growth-enhancing capital and social spending might be cut to meet the fiscal targets, or that fiscal targets might be missed, undermining credibility of the fiscal policy, it further warned.The expected boost to the rural consumption from favourable monsoons might be dampened by deleveraging of debt incurred by the farmers over the previous 2 drought years.Private investment also faces numerous domestic impediments in the form of corporate debt overhang, tension in the financial sector, and policy and regulatory challenges. The report said that if these bottlenecks were not alleviated, subdued private investment would lead to downside pressures on the potential growth of the country.The World Bank said that economic growth remained robust. GDP growth accelerated to 7.5 percent y/y in the 4 quarters ending June 2016 from an average of 6.5 per cent in the previous 12 quarters, it said.It said that this acceleration had been driven by urban consumption and public infrastructure investments. It also added that rural consumption had been constrained by 2 successive drought-years and restrained growth in rural wages.Sustained growth in manufacturing and modern services and in personal credit has underpinned urban consumption. The report also said that the investment momentum remained subdued in spite of concerted growth in public spending, largely because of global excess capacity and deleveraging of corporate and bank balance sheets.

Source : https://www.dynamiclevels.com/en/blog/world-bank-indias-gdp-growth-to-remain-strong

A writer by day and a passionate reader by night. Writing just doesn't fill my pocket but it also fills my heart. Passion for writing about new events & happenings is what soothes my mind & soul.