World Bank sees India growing at 5.5%

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World Bank on Friday said India’s economic growth is projected at 5.5 per cent this financial and will accelerate to 6.3 per cent in 2015-16 and 6.6 per cent in 2016-17.

This meant India’s average GDP growth will be far below 7 per cent projected in the 12th five-year plan ending 2016-17. The 12th plan had originally projected the GDP growth to be 9 per cent, which is now informally projected to be 7 per cent.

But the World Bank in its global economic prospects released on Friday said India was in a strong position to tap global growth, which is also improving. Overall the global economy is expected to pick up speed as the year progresses and is projected to expand by 2.8 per cent this year, strengthening to 3.4 per cent and 3.5 per cent, respectively, in the next two years.

If there is a $25 spike a barrel in oil prices in the next six months due to the situation in Iraq, then it could impact global growth from 0.2 to 0.4 per cent. If India’s monsoon situation is impacted due to El Nino effect, then India’s GDP growth could be lower by up to 0.2 per cent.

On the economic reform agenda, the World Bank said India should roll out GST, reduce subsidies and broaden tax base. One important tax reform GST will help in pushing not only GDP growth but also increase tax revenue. “Implementing the goods and services tax (regime), targeting subsidies better and broadening the tax base will help create the fiscal space for supporting accelerated growth and poverty reduction,” said Onno Ruhl, World Bank's country director-India.

Ruhl said: “With a rising global demand, we expect that a rebound in domestic investments and a pick-up in manufacturing activities will help India move from two years of sub-5 per cent growth to over 6 per cent in the next year.” “Fiscal reforms such as simplifying the tax structure and broadening tax base would be essential for creating space for pro-poor expenditure and accelerating growth in years ahead,” he said.

“India’s general government deficit, despite falling, is still more than 2 per cent points of GDP higher than in 2007, indicating that depleted fiscal buffers have yet fully restored,” the report said.

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