As per the World Bank’s Global Economic Prospects (GEP) report, Indian economy is likely to grow over 6 percent rate in 2014-15 and increase to 6.6 percent in FY2015-16 and 7.1 percent in FY2016-17 on the back of recovery in global demand and increasing domestic investments. The report noted that during the previous year, India, with large current account and fiscal deficits and weaker growth, was hit hard mainly due to withdrawal of foreign investments, resulting into steep fall in rupee value against the dollar. Back then, rupee had subsequently appreciated because of policy interventions to support foreign exchange markets, capital flows and equity markets and delayed QE tapering. However, World Bank cautioned that a sharp withdrawal of foreign capital in the future could increase risk of corporate debt distress, while recapitalization of public sector banks can put pressure on the Government’s fiscal positions.
Referring to the growth in South Asia, the report highlighted that weaker growth in India, several years of rising inflation and current account deficits have opened up a large negative output gap, which is projected to gradually close on account of the improving economy. The regional growth is expected to strengthen to 5.7 percent in 2014 and about 6.7 percent in 2016, however, growth in South Asia is estimated to remain weak at 4.6 percent in 2013. Further, the World Bank highlighted that the global economy is projected to strengthen this year, as growth will be picking up in developing countries and high-income economies, however, downside risks continue to threaten the global economic recovery. The report further added that the global economic indicators show improvement with the European countries looking out of recession.
Regarding the performance of advanced economies, the World Bank’s report noted that advanced economies are gaining momentum, which will also support the growth in developing countries in the coming future. However, the World Bank expressed the need for developing nations to adopt structural reforms that promote job creation, strengthen financial systems and shore up social safety nets.
Referring to the growth in South Asia, the report highlighted that weaker growth in India, several years of rising inflation and current account deficits have opened up a large negative output gap, which is projected to gradually close on account of the improving economy. The regional growth is expected to strengthen to 5.7 percent in 2014 and about 6.7 percent in 2016, however, growth in South Asia is estimated to remain weak at 4.6 percent in 2013. Further, the World Bank highlighted that the global economy is projected to strengthen this year, as growth will be picking up in developing countries and high-income economies, however, downside risks continue to threaten the global economic recovery. The report further added that the global economic indicators show improvement with the European countries looking out of recession.
Regarding the performance of advanced economies, the World Bank’s report noted that advanced economies are gaining momentum, which will also support the growth in developing countries in the coming future. However, the World Bank expressed the need for developing nations to adopt structural reforms that promote job creation, strengthen financial systems and shore up social safety nets.
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