NEW DELHI: World Bank has predicted a GDP growth rate of 8 percent for India by 2017 and said that economic growth would be accelerate in South Asia with positive oil prices.
In India, GDP growth is expected to accelerate to 7.5 per cent in fiscal year 2015/16. It could reach 8 per cent in FY 2017/18, on the back of significant acceleration of investment growth to 12 per cent during FY 2016-FY 2018, the bank said.
The country is attempting to shift from consumption to investment-led growth, at a time when China is undergoing the opposite transition, it said in its semi-annual report.
The bank’s twice-a-year South Asia Economic Focus report projected steady increase in regional growth from 7 per cent in 2015 to 7.6 per cent by 2017 on grounds of strong consumption and increasing investment.
Given India’s weight in regional Gross Domestic Product, the projections reflect to a large extent India’s expected growth acceleration, driven by business-oriented reforms and improved investor sentiment.
The decline in oil prices has been reflected in the domestic prices of oil products to different extents across the region. The pass-through exceeded 50 per cent for most oil products in Pakistan, but was nil in Bangladesh, it said.
Together with favourable food prices, cheaper oil has contributed to a rapid deceleration of inflation. South Asia went from having the highest inflation rate among developing regions to having the lowest in barely one year.
In March 2013, the Consumer Price Index (CPI) of the region had increased by 7.3 per cent year-on-year compared to 1.4 per cent in March 2015, the report said.
“The biggest oil price dividend to be cashed in by South Asia is one yet to be earned, but it is not one that will automatically transit through government or consumer accounts,” said WB South Asia Chief Economist Martin Rama.
“Cheap oil gives the opportunity to rationalise energy prices, reducing the fiscal burden from subsidies and contributing to environmental sustainability,” he said.
The report noted India has already taken encouraging steps to decouple international oil prices from fiscal deficits and to introduce carbon taxation to address the negative externalities from the use of fossil fuels.
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