Indian economy is likely to regain its pace in the current fiscal and once again become the fastest growing emerging economy, a World Bank report said. The Global Economic Prospects report released by the World Bank on Tuesday projects that India will see its gross domestic product (GDP) grow at a rate of 7.3 per cent during the ongoing fiscal and at 7.5 per cent in the two succeeding ones.
"Growth in India is projected to accelerate to 7.3 percent in FY2018/19 and 7.5 percent on average in 2019-20, reflecting robust private consumption and firming investment, broadly in line with January projections," the World Bank report said.
In comparison, the rest of the South Asia region (SAR), excluding India, will post GDP growth of 5.6 per cent in for the current fiscal and the next one, moving up to 5.7 in 2020-21.
"India's GDP growth bottomed out in the middle of 2017 after slowing for five consecutive quarters, and has since improved significantly, with momentum carrying over into 2018 on the back of a recovery in investment. Although investment growth was still moderately lower in 2017 than in 2016, high-frequency indicators suggest that it accelerated into 2018," World Bank said.
The Indian economy has also moved past the disruptions caused by the implementation of Goods and Services Tax (GST) in mid-2017, World Bank observed in its report, adding that manufacturing output and industrial production have continued to firm since then. The report also forecasted that the recovering Indian economy will also help economic growth in South Asia region to accelerate to 6.9 per cent in 2018 from 6.6 per cent in 2017.
Improving economic conditions in India will help uplift the quality of life too, World Bank said. "Per capita growth rates in the region are strong, and are expected to help bring down poverty in coming years, particularly in India," it said. However, structural weaknesses and macroeconomic vulnerabilities remain key challenges to be addressed by SAR governments.
Talking about possible risks to the positive outook, World Bank said, "In a number of countries, a further deterioration in fiscal balances (e.g., India, Maldives, Pakistan, Sri Lanka), a continued build-up of debt, and widening current account deficits, present significant vulnerabilities to a tightening of domestic or external financing conditions."
Adverse global conditions like an abrupt tightening of global financial conditions and escalating trade protectionism could also spell bad news for India and rest of the region even though the region is relatively less open to trade, World Bank cautioned. "Since South Asia is net oil importer, a higher-than-expected rise in oil prices might amplify macroeconomic vulnerabilities and weigh on economic activity," it added.
Inflation has been increasing in the region recently, and is close to or above targets in some countries like India, World Bank said.