Noting that public investment is helping kick-start the investment cycle, the World Bank on Thursday retained its GDP (gross domestic product) growth projection for India at 7.5% for the current financial year, despite an unfavourable external environment which has hurt the country’s merchandise exports.
In its latest bi-annual India Development Update, the multilateral agency said India’s growth is expected to gradually accelerate to 7.8% in FY17 and 7.9% in FY18. The country’s economy grew by 7.3% in FY15 and by 7% in Q1FY16. In April, the World Bank had forecast 7.5% growth for the current year. “Since then, the important positive development has been actual increase in public capital expenditure while the negative factor has been external environments because of (concerns) on China. The two factors balance each other out. That’s why, we stick to the earlier forecast,” said Frederico Gil Sander, team leader of the India report.
The World Bank said to sustain GDP growth over a longer-period, India’s exports required a recovery and the implementation of reforms such as the goods and services tax (GST) at at the earliest.
The World Bank’s growth estimate for FY16 is in line with the recent assessment by the finance ministry that the economy could grow by at least 7.5% in FY16, which is higher than the International Monetary Fund (IMF) estimate of 7.3% and 7% by Moody’s. The Economic Survey had projected the real GDP to grow between 8.1-8.5%.