Notwithstanding delays in domestic policy reforms, India’s economy “is slowly gaining momentum” and “is projected to grow by 7.3 per cent this year,” a United Nations report forecast on Thursday.
The World Economic Situation and Prospect report, in its mid-2016 update, has said India is expected to achieve a 7.5 per cent GDP growth in 2017 and the economic prospects of the South Asian region will be “contingent” on the growth trajectory of India and Iran.
Economy slowly gaining tempo
“India’s economy is slowly gaining momentum, with an expected GDP growth of 7.3 and 7.5 per cent in 2016 and 2017, respectively.
“Despite some delays in domestic policy reforms and enduring fragilities in the banking system, investment demand is supported by the monetary easing cycle, rising FDI, and government efforts towards infrastructure investments and public-private partnerships,” the report, released here said.
Bad news for China
China, which grew at about 6.9 per cent in 2015, will continue to witness slowdown in growth, with its GDP projected to grow 6.4 per cent in 2016 and 6.5 per cent in 2017.
“A larger-than-expected slowdown in China would have widespread spill-over effects through trade, financial and commodity markets, while a further deterioration of commodity prices could trigger debt crises in certain commodity-dependent economies,” said the report, produced jointly by the U.N. Department of Economic and Social Affairs (UNDESA) and the U.N. Conference on Trade and Development (UNCTAD).
In line with January projections
The growth estimates for India in the mid-year update are in line with projections made in January this year, when the 2016 World Economic Situation and Prospect report had said that India will be the world’s fastest growing large economy at 7.3 per cent in 2016, improving further to 7.5 per cent in the following year.
India’s economy, which accounts for over 70 per cent of South Asia’s GDP, had grown by about 7.2 per cent in 2015.
Oil does the trick for South Asia
The report added that despite the protracted instabilities and general weakness of the global economy, South Asia’s economic outlook remains favourable, with most countries benefiting from low oil prices.
Regional GDP growth is expected to accelerate from 6.1 per cent in 2015 to 6.6 this year and 6.8 per cent in 2017, owing to robust private consumption, strengthening investment demand and gradual progress on domestic policy reforms.
Relatively tame inflation
Inflation in the South Asian region is projected to remain relatively tame, reflecting subdued commodity prices and lower pressures from supply-side bottlenecks.
“This has increased monetary policy space, with prospects for further easing in some economies, including India,” it said.