India’s Economic Growth Picks Up, but Uncertainty over its Momentum Remains

The Indian economy will continue to grow but acceleration year-on-year will be gradual, says the latest India Development Update of the World Bank.
According to the Update, India was able to take advantage of the sharp decline in global oil and commodity prices to eliminate petrol and diesel subsidies and increase excise taxes. Resources from lower subsidies and higher taxes have been well utilized in lowering deficits and increasing capital expenditure. Current account deficit narrowed 3.4 percentage point between financial year (FY) 12-13 and FY 14-15. In the first six months of calendar 2015 the construction sector expanded by 4 percent.
The Update expects India’s economic growth to be at 7.5 percent in 2015-2016, followed by further acceleration to 7.8 percent in 2016-2017 and 7.9 percent in 2017-2018. However, acceleration in growth is conditional on the growth rate of investment picking up to 8.8 percent during FY2016-FY2018, it adds.

For the economy to achieve its potential, the Update calls for three key domestic reforms. First, boosting the balance sheets of the banking sector by addressing the challenges in the infrastructure sector, especially power and roads. Second, continuing to improve the ease of doing business and enacting the GST; and third, enhancing the capacity of states and local governments to deliver public service as more resources are devolved from the center.
Press-release at the official World Bank web-site