The World Bank has stated that the India Economy is poised to retain a 7.5 per cent growth for the next three years on the back of strong investment and private consumption.
In its Global Economic Prospects released by the International Bank on Tuesday, it pegged India’s growth in the fiscal year 2018-2019 at 7.2 per cent. It also stated that the stagnation in government consumption was counterbalanced by robust investment, that benefitted from public infrastructure spending.
The Bank has asserted that the growth in the Indian economy will remain at 7.5 per cent, unchanged from the previous forecast, and will remain same for the next two fiscal periods, making it the world’s fastest growing economy for the next 3 years. China, on the other hand, is experiencing headwinds in its economy, with its growth rate for FY19 projected to drop to 6.2 per cent and then subsequently to 6.1 per cent in 2020 and 6 per cent in 2021.
The report mentions that the private consumption and investment will gain from rising credit growth amid more accommodative monetary policy, with inflation having dropped below the Reserve Bank of India’s target. It also added that the Support from delays in planned fiscal consolidation at the central level should partially offset the effects of political uncertainty around elections.
The outlook for South Asia remains positive with regional GDP expected to expand to 6.9 per cent in 2019, 0.2 percentage point down from previous predictions due to downward revisions for Pakistan, but it will rise up to 7 per cent in 2020 and 7.1 per cent in 2021. Pakistan’s growth is expected to slow down further at 2.7 per cent in FY19-20.
The Washington-based lender has observed the military clash between the two South-Asian neighbours in mid-February this year remained contained and the economic ramifications were not substantial. However, it added that rekindling of tensions between the two neighbours can fuel uncertainty, deflate the investors from investing in the region, an apparent remark for the Pulwama attack and the retaliatory Balakot airstrikes by India.
It further added that the comprehensive implementation of GST in India is yet to be complete and hence there is ambiguity about the GST revenue. The report mentioned that the contribution of exports to economic activity is expected to remain weak with moderate global trade growth.