Washington: The World Bank has predicted a GDP growth rate of 8 per cent for India by 2017 and said that a strong expansion in the country, coupled with favourable oil prices, would accelerate the economic growth in South Asia. In India, GDP growth is expected to accelerate to 7.5 per cent in fiscal year 2015/16. It could reach 8 per cent in FY 2017/18, on the back of significant acceleration of investment growth to 12 per cent during FY 2016-FY 2018, the bank said in its semi-annual report.
The country is attempting to shift from consumption to investment-led growth, at a time when China is undergoing the opposite transition, it said. The bank’s twice-a-year South Asia Economic Focus report projected steady increase in regional growth from 7 per cent in 2015 to 7.6 per cent by 2017 on grounds of strong consumption and increasing investment.
In March 2013, the Consumer Price Index (CPI) of the region had increased by 7.3 per cent year-on-year compared to 1.4 per cent in March 2015, the report said. The biggest oil price dividend to be cashed in by South Asia is one yet to be earned, but it is not one that will automatically transit through government or consumer accounts,” said World Bank South Asia Chief Economist Martin Rama.
The report noted India has already taken encouraging steps to decouple international oil prices from fiscal deficits and to introduce carbon taxation to address the negative externalities from the use of fossil fuels. The challenge will be to stay the course in the event of oil price hikes, something that may well happen in the medium- term.
Savings from reduced subsidy bills could be used to address the crying needs of the region in terms of infrastructure, basic services and targeted support for the poor,” said World Bank Vice President for South Asia Annette Dixon.
The report shows that households in the region stand to gain from lower oil prices, both directly through lower energy spending and indirectly through faster growth. But except for kerosene, richer households spend more in oil products, and stand to gain more.
Bureau Report
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