WASHINGTON: Striking an upbeat note on the prospects of the Indian economy, the World Bank has projected 6.4% growth rate for the country this year, which will rise to 7.3% by 2015.
The news should cheer those who are still betting on the India growth story despite a sharp slowdown that has pushed down the projected growth to 5.4% in the fiscal year ending March 2013.
According to World Bank, the slowdown in India, South Asia’s largest economy, has brought down growth in the region to an estimated 5.4% in 2012 (7.4% in 2011), said the World Bank’s latest Global Economic Prospects, unveiled Jan 15.
Regional GDP is projected to grow by 5.7% in the 2013 calendar year, and by 6.4% and 6.7% in 2014 and 2015, respectively, driven by policy reforms in India, stronger investment activity, normal agricultural production, and improvement in export demand.
The World Bank is, however, hedging on regional growth. The growth in the region remains vulnerable to an uncertain external environment and country-specific factors, said the report.
“Moreover, greater volatility in international financial markets could make it difficult for India to finance its widening current account deficit,” said the report.
The World Bank has, however, a word of caution for the economies of emerging countries like India and Brazil. The report asks developing countries to safeguard their economic growth against the continued fragility of the world economy. The report points out that the growth in high-income countries is weak four years after the advent of the global financial crisis.
Developing countries need to focus on raising the growth potential of their economies, while strengthening buffers to deal with risks from the euro area and fiscal policy in the US, the said the report.
“The economic recovery remains fragile and uncertain, clouding the prospect for rapid improvement and a return to more robust economic growth,” said World Bank Group President Jim Yong Kim said.
“Developing countries have remained remarkably resilient thus far. But we can’t wait for a return to growth in the high-income countries, so we have to continue to support developing countries in making investments in infrastructure, in health, in education.
“This will set the stage for the stronger growth that we know that they can achieve in the future,” he said.
Developing countries recorded their slowest economic growth rates of the past decade, due to the heightened euro area uncertainty in May and June of 2012, said the World Bank report in 2012.
Since then, the financial markets have, however, shown a marked upswing. International capital flows to developing countries, which fell 30 per cent in the second quarter of 2012, have recovered and bond spreads have declined to below their long-term average levels of around 282 basis points, it said.
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