Asian Development Bank pegs GDP growth rate for 2014-15 at 5.5 per cent

Indian men work at the newly inaugurated air-conditioning compressor plant of Highly Electrical Appliances India Private Limited ( Highly India) near Ahmadabad, India, Tuesday, Nov. 26, 2013. Shanghai Hitachi, a joint venture between Highly group of China and Hitachi Appliances of Japan, global leading air-conditioning compressor manufacturers Tuesday commissioned India's largest air--conditioning compressor plant, having capacity of 2 million sets per annum. The facility set up over an area of 33000 square meters with an investment of US$ 72 million, said a press release. (AP Photo/Ajit Solanki)

India’s GDP is poised to accelerate to 5.5 per cent in 2014-15 on the back of improved performance in industry and services but it may take some time for the country to reach its potential growth rate, says an Asian Development Bank (ADB) report.

“The recent deceleration of economic growth in India appears to have bottomed out, but the economy will not reach its potential until remaining structural bottlenecks are overcome”, said the ADB Outlook 2014 released on Tuesday.

Indian economy, according to Central Statistical Office (CSO), is estimated to record a growth rate of 4.9 per cent in 2013-14, up from decade’s low of 4.5 per cent posted in the previous financial year. The economy has been growing at 9 per cent before the growth rate was pulled down by 2008 global financial meltdown.

“India’s capacity for more rapid growth over the long term is high, with a promising outlook for labour, worker skills, capital, infrastructure, and productivity,” ADB Deputy Chief Economist Juzhong Zhuang said, adding a serious effort on reforms would be needed to achieve and sustain higher rates of growth going forward.

The growth is expected to rise further to 6.0 per cent in 2015-16 as the recovery in advanced economies will bolster external demand and government actions are likely to remove some structural bottlenecks impeding industry and investment, says the ADB report.

The Indian economy, ADB added, has remained constrained by slow industrial growth, contracting manufacturing output, weak investment and a reduction in private consumption.

The report further said that the current account deficit (CAD) is estimated to have narrowed sharply to 2.2 per cent of GDP in 2013-14, from 4.7 per cent a year earlier.

Sustained economic recovery will have to be led by improved investment and consumption, ADB report said.

It said the “progress by the Cabinet Committee on Investment in resolving delays in several large infrastructure projects is likely to provide traction in raising investment.”

Moreover, it added, companies will be looking to see if actions are taken to improve the investment climate and improved global growth prospects bolster external demand.