World Bank projects India's 2015 GDP at 6.2%

Business

oi-Sunil

By Sunil Fernandes

Published: Thursday, October 17, 2013, 12:29 [IST]

The World Bank has projected India's GDP to rise to 6.2% from 4.7% in 2014. "Recovering the higher rates of growth in India is critical to achieving the global goal of ending extreme poverty by 2030," said Martin Rama, chief economist for the South Asia Region at the World Bank. "While the reform momentum has accelerated in the last few months, the current situation offers an opportunity to further strengthen the business environment and enhance fiscal space."

A report from the World Bank expects real GDP to expand by 4.7% this fiscal year (FY2014) before accelerating to 6.2% in FY2015. Although output growth in the first quarter of the current fiscal year fell to 4.4%, growth is expected to rebound strongly in the second half of FY2014 with core inflation trending down, a bumper crop expected in agriculture (where a 5% increase in area sown is expected to raise agricultural growth to 3.4% from 1.9% a year ago), and exports likely to benefit substantially from the rupee's depreciation. Growth is expected to improve further in the medium term as strengthening exports support a recovery in industrial activity and new investment projects come on stream.

The report's projections assume an improvement in the global macroeconomic environment, with global growth accelerating to above 3% in 2014 from around 2% in calendar 2013. The recent depreciation in the rupee positions India well to take advantage of the global recovery. Fully tapping these opportunities, however, will require policy efforts to narrow the infrastructure gap, buttress the financial sector via capitalization and broader banking & financial sector reforms, ease the restrictive regulatory environment which creates strong incentives for Indian firms to remain small, and strengthen fiscal balances.

The report also notes that while decline in poverty accelerated, vulnerability remains high. Between 2005 and 2012, India lifted 137 million people out of poverty and reduced the poverty rate to 22%.

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