World Bank projects 5.7 per cent growth for India in FY14
The World Bank on Wednesday projected an economic growth rate of 5.7 per cent in fiscal year 2014 for India on the back of a more competitive exchange rate and many large investments going forward.
"The region's largest economy, India, would see growth rise to 5.7 per cent in fiscal year 2014 from 4.8 per cent last fiscal year with activity receiving a boost from a more competitive exchange rate and many large investment projects going ahead," the World Bank said in its latest edition of 'South Asia Economic Focus'.
Another multilateral agency International Monetary Fund (IMF) had the previous day forecast that Indian economy would recover from 4.4 per cent growth in 2013 to 5.4 per cent in 2014. The estimate triggered a rally on Indian bourses, with the BSE benchmark Sensex surging close to 360 points to all-time closing high of 22,702.34.
The Indian rupee, which plunged to all-time low of 68.85 in August last year, has since then recovered to trade in 60-levels against the US dollar. The IMF had also cited export competitiveness as a reason for possible growth recovery.
The World Bank report said in India the problem is the banking sector's growing exposure to company debt. The fear is that this could ultimately affect the government's finances through its ownership of state banks and the need to prop up distressed but systemically important banks, it added.
In its twice-a-year 'South Asia Economic Focus', the World Bank forecast that economic growth in the region would rise to 5.8 per cent in 2015 from 5.2 per cent this year and 4.8 per cent last year.
South Asian countries - Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka - appeared to have largely recovered from last year's financial turmoil caused by changes in US Federal Reserve monetary policy.
Many were rebuilding currency reserves while curbing current account deficits, it said.
But these successes on the external side were accompanied by looming problems in the domestic economy. Economic growth could be held back by unstable banking sectors, inflation, fiscal deficits and debt, and persistent shortfalls in energy and transport infrastructure across the region, it said.
"Now that external pressures are waning, it's time to refocus on addressing problems within the economies in South Asia so that countries can boost growth and reduce poverty," said South Asia chief economist Martin Rama.
"The good news is that across South Asia there is a growing momentum in support of reforms to increase growth because governments recognize this is the best way to overcome poverty," Mr Rama added.
The bank said Pakistan's economic growth could increase to 4 per cent this fiscal year from 3.6 per cent in fiscal year 2013 as its economy benefitted from a reduction in electricity blackouts, resilient remittance flows from Pakistani workers abroad, rebounding manufacturing exports and a more buoyant services sector.
Nepal was recovering from a difficult year affected by setbacks in the agricultural sector and with its government budget. Helped by strong remittance flows boosting consumption and the services sector, the economy should grow by 4.5 per cent in 2014 after 3.6 per cent in 2013.
Sri Lanka would continue to grow at 7.3 per cent this year as the economy was sustained by new capacity from infrastructure investments and rebuilding after the country's recent conflict, the report said.
Economic activities recovered in the second half of 2014 in Bangladesh, driven by resilient exports and domestic demand, following setbacks suffered in the first half due to political uncertainty and turmoil. A recovery in export growth and increases in public expenditure are likely to help achieve 5.4 per cent GDP growth in 2014, slightly lower than last year's 6 per cent.
