UN forecasts Indian economic growth at 7.3% in 2016

13 May '16

4 min read

India's economy is projected to grow by 7.3 per cent this year despite delays in domestic policy reforms, according to the UN's World Economic Situation and Prospect report.

The World Economic Situation and Prospect report, in its mid-2016 update, said India is expected to achieve a 7.5 per cent GDP growth in 2017 and the economic prospects of the South Asian region will be “contingent” on the growth trajectory of India and Iran. The growth estimates for India in the mid-year update are in line with projections made in January this year.

“India's economy is slowly gaining momentum, with an expected GDP growth of 7.3 and 7.5 per cent in 2016 and 2017, respectively. Despite some delays in domestic policy reforms and enduring fragilities in the banking system, investment demand is supported by the monetary easing cycle, rising FDI, and government efforts towards infrastructure investments and public-private partnerships,” the report said.

According to the report produced jointly by the UN Department of Economic and Social Affairs (UNDESA) and the UN Conference on Trade and Development (UNCTAD), China, which grew at about 6.9 per cent in 2015, will continue to witness slowdown in growth, with its GDP projected to grow 6.4 per cent in 2016 and 6.5 per cent in 2017.

In January, the 2016 World Economic Situation and Prospect report had said that India will be the world's fastest growing large economy at 7.3 per cent in 2016, improving further to 7.5 per cent in the following year.

India's economy, which accounts for over 70 per cent of South Asia's GDP, had grown by about 7.2 per cent in 2015.

The report noted that despite the protracted instabilities and general weakness of the global economy, South Asia's economic outlook remains favourable, with most countries benefiting from low oil prices.

Regional GDP growth is expected to accelerate from 6.1 per cent in 2015 to 6.6 this year and 6.8 per cent in 2017, owing to robust private consumption, strengthening investment demand and gradual progress on domestic policy reforms.

Inflation in South Asia is projected to remain relatively tame, reflecting subdued commodity prices and lower pressures from supply-side bottlenecks. “This has increased monetary policy space, with prospects for further easing in some economies, including India,” it said.

The report, however, said the favourable outlook for South Asia notwithstanding, economies in the region confront several domestic downside risks, including setbacks in reform agendas and political instabilities. “Structural issues like energy shortages, low participation of women in labour force and infrastructure gaps remain major regional challenges,” it said.

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