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India to grow robust at 7.8% in 2016-17

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According to the World Bank‘s latest Global Economic Prospect (GEP) report, India will continue to be the bright spot of the global economy and is projected to grow at a robust 7.8% in fiscal 2016-17.

  • World Bank marginally reduced India‘s growth rate 2% in 2015 and 0.1% in both 2016 and 2017 but still continues to be the bright spot of the global economy.
  • China is estimated to grow at 7% in 2016 and 6.5% each in 2017 and 2018.
  • Russia and Brazil are expected to remain in recession in 2016.

India to grow robust at 7.8% in 2016-17Ongoing fiscal consolidation in India has reduced the central government’s fiscal deficit to close to 4% of GDP, down from a peak of 7.6% in 2009. In the report, South Asia is projected to be a bright spot in the outlook for emerging and developing economies with growth speeding up to 7.3% in 2016 from 7% in 2015.

What will sway things for India?

  • Government efforts to boost investment and progress on infrastructure, specifically the boost to public-private-partnerships (PPPs) will spur medium-term growth.
  • Low global oil prices as well as domestic petroleum sector pricing reforms will ease energy costs for Indian manufacturing firms.
  • The decline in inflation and the implementation of the Seventh Pay Commission report will boost urban spending, which will make up for the drop in rural spending because of weak monsoons.

The better growth prospects compared to other developing countries will keep foreign investment flowing in, through both the portfolio and direct investment routes.