ADB raises Indian GDP growth forecast for next year

29 Sep '14

2 min read

The Asian Development Bank (ADB) has increased its growth forecast for Indian gross domestic product (GDP) from 6 percent anticipated in April to 6.3 percent for the fiscal year ending March 31, 2016.

However, in the ongoing fiscal year 2014-15, ADB has maintained its Indian GDP growth forecast at 5.5 percent, according to an update of ‘Asian Development Outlook 2014’—ADB’s annual economic publication.

The new ADB says the Indian economy is set to benefit from improved growth in advance economies and a revival of investment, spurred in part by a new government with a strong mandate and a wide-ranging reform agenda.

Launching the new report, ADB chief economist Shang-Jin Wei said, “By advancing its structural reform plans and proceeding with large infrastructure projects, the government (Indian) can spur private sector investment that will build strong growth momentum for the next few years.”

“Given its labor cost advantage and vast overseas diaspora networks, by putting the right policy package in place India could replicate or even exceed its best growth performance of the past,” Shang-Jin added.

In April-June 2014 quarter, India’s economic activity picked up to 5.7 percent—the highest pace in nine quarters. Growth was supported by an upturn in domestic demand led by investment—with fixed investment soaring by 7 percent—and by government spending. The industrial sector expanded by 4.2 percent, its fastest pace in more than two years. Strength in industry was led by manufacturing, which grew 3.5 percent after contracting in three of the previous four quarters.

The report says that recent reforms such as easing environmental and forest clearances for mines, roads, power stations, and irrigation systems, and expanding the role of the government’s project monitoring group, will help speed the implementation of projects in the pipeline.

The report also emphasizes that achieving sustainable growth will require bolder reforms to address land-acquisition issues in order to balance the needs of industry and landowners, streamline regulations and business processes by cutting red tape, and implement a uniform goods and services tax. (RKS)

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