New Delhi: India’s economy will grow by 6.2% in 2014-15, the World Bank said on Wednesday, lowering its earlier estimate of 6.5% expansion for the year.
India’s growth will recover from an estimated 4.8% in the year to March, boosted by an uptick in global demand and domestic investment, though there are significant risks to the latter, the bank said in its latest Global Economic Prospects report.
“GDP (gross domestic product) growth in India measured at factor cost is projected to rise to over 6% in the 2014-15 fiscal year, and then to increase to 6.6% in FY2015-16 and to 7.1% in FY2016-17,” the report said.
However, the World Bank projected global GDP growth at 3.2% in 2014, compared with a June projection of 3% and up from 2.4% in 2013, pulled along mostly by a recovery in high-income economies. The bank sees a global expansion of 3.4% in 2015, compared with 3.3% predicted in June.
In the US, where growth is seen accelerating to 2.8% this year, unchanged from the outlook in June, the recent budget compromise in Congress will ease spending cuts previously in place and boost confidence from households and businesses, the bank said.
Growth in developing countries is expected to rise at a slower pace of 5.3% in 2014 than the previously estimated 5.6%.
The bank said a projected strengthening of demand in the euro zone area as well as the US and robust growth in developing-country markets will support regional exports in the South Asia region, thus boosting medium-term growth, despite slowing of US monetary stimulus.
“The projected increase in investment rates and GDP growth, however, will depend critically on ensuring macroeconomic stability (including reducing fiscal deficits and inflation), making sustained progress on policy reforms, and reducing structural and regulatory constraints on production,” it said in its report.
The report said relatively stable or declining international commodity prices will contribute to reducing inflationary and current account pressures in India and, with normal harvests and sustained remittance flows, will support consumption in the region.
“We expect developing countries growth to rise above 5% in 2014, with some countries doing considerably better, with Angola at 8%, China at 7.7%, and India at 6.2%,” World Bank chief economist Kaushik Basu said in a statement. “But it is important to avoid policy stasis so that the green shoots don’t turn into brown stubble.”