“While the region is now in a position of strength, structural constraints holding back export and investment growth do persist. To keep the momentum and accelerate job creation, governments should enact reforms easing infrastructure bottlenecks and paving the way to greater competitiveness,” World Bank South Asia Chief Economist Martin Rama said. “Fiscal space remains limited while financial sector vulnerabilities persist.”
Rapid growth has not yet translated into significantly higher government revenue generation and improved fiscal balances. Budget deficits are expected to remain at 6.5 per cent of GDP in 2015, the highest among all developing regions. Tax collection remains well below estimates, and has even deteriorated across major South Asian economies.
“Mobilizing revenue is critical for the region to develop its infrastructure and deliver better social services, while creating a financial cushion to address potential shocks in the future,” said Annette Dixon, World Bank South Asia Vice President. “In some cases introducing and rolling out modern tax instruments holds the key to higher revenue, but containing exemptions and special regimes are crucial across most of the region.”
In India, GDP growth is expected to accelerate to 7.5 per cent this year and 7.8 per cent in 2016 lifted by cheap oil prices and limited exposure to the global financial turmoil. However, delays in the adoption and implementation of key reforms could affect investor sentiment. A weak trade performance and financial sector vulnerabilities could also hold back GDP growth, the report warned.
It said that while many South Asian countries show potential for accelerated growth in the short to medium term, the transition in Afghanistan, the earthquakes in Nepal, and revisions to national accounts in Sri Lanka, have resulted in all three countries experiencing slower growth than previously expected. (SH)
Fibre2Fashion News Desk – India
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