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World Bank: Indian economy has turned the corner
29
Apr '15
The World Bank has said that the Indian economy has turned the corner and has projected the country’s GDP to grow at 7.5 per cent in the current fiscal on account of increased economic activity and greater stability.

It also sounded a note of caution that the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), touted as the world’s largest anti-poverty programme, has paradoxically worked less well in India’s poorest states.

"India's economic growth is expected to rise to 7.5 per cent in 2015-16, followed by further acceleration to 7.9 per cent in 2016-17 and 8 per cent in 2017-18," the World Bank said in its India Development Update report. But the growth projection came with a rider.

"However, acceleration in growth is conditional on the growth rate of investment picking up to 11 per cent during FY16 to FY18," the World Bank said.

The government in the Union Budget 2015-16 had projected the GDP growth to be at 8.5 per cent this fiscal.

It said India's government has begun to implement reforms to unlock the country's investment potential to improve the business environment, liberalise FDI, boost both public and private investment in infrastructure, quickly resolve corporate disputes, simplify taxation and lower corporate taxes.

States are set to receive more resources and spending power, and the government has reiterated its resolve to implement GST by April 2016 which could increase India's tax to GDP ratio, it added.

To achieve higher investment growth, the report has called for fiscal reforms that protect public capital spending, financial sector reforms, and reforms in the business environment -- all of which can help unlock private investment.

"The government has made progress in several policy areas, and long-term prospects for growth remain bright for India," said World Bank Country Director for India, Onno Ruhl.

"The current situation offers an opportunity to further strengthen the business environment and enhance the quality of public spending. Continuous strong momentum in these reforms will further unleash the productivity that Indian firms need in order to create jobs and become globally competitive," Ruhl added.

The government has announced an ambitious development agenda supported by a three-pronged strategy of promoting fast and durable economic growth, improving the delivery of social benefits and extending social safety to the elderly and the underprivileged.

The report pointed to domestic and external risks, saying the recent economic turnaround and the outlook rest crucially on oil and commodity prices staying soft. "...to further insulate the economy from the global price of oil, the Update suggests weaning the fiscal outcomes more fully from oil prices, by encouraging alternative sources of energy, creating additional fiscal buffers by using petroleum taxation more actively, as well as rationalising subsidies."

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