Indian economy expected to grow by 7.5%, keeping top spot: World Bank

The Bank’s Economic Prospects Report, released on June 4, forecast India’s economy to grow by 7.5 percent during this and the next two fiscal years, thus retaining its top spot as the fastest growing major economy

As Indian Finance Minister Nirmala Sitharaman prepares her budget, the World Bank reports that India’s economy grew by 7.2 percent in 2018-19, in contrast to the recent Indian Central Statistical Office (CSO) estimate of only 6.8 percent GDP growth during the period.

The Bank’s Economic Prospects Report, released on

June 4, forecast India’s economy to grow by 7.5 percent during this and the next two fiscal years, thus retaining its top spot as the fastest growing major economy. It would be helped by a “more accommodative monetary policy” and low inflation, it said. The report retained the forecasts it made in January for India.

India’s growth forecast is the brightest spot in a grim forecast for the world economy. The report said that the global growth rate was estimated at 3 percent last year and is forecast to dip steeply to 2.6 percent this year, before edging up to 2.7 percent next year and 2.8 percent in 2021.

India “is estimated to have grown 7.2 percent in fiscal year 2018-19, which ended March 31”, the report said. “A slowdown in government consumption was offset by solid investment, which benefitted from public infrastructure spending”.

The Bank said that the cutoff dates for data used in the report is May 23.

On May 31, the CSO said that India’s gross domestic product (GDP) growth during the 2018-19 fiscal stood at 6.8 percent, lower than the previous year’s 7.2 percent. The CSO said the Indian economy grew by only 5.8 percent in the fourth quarter. That dragged down the fiscal year’s growth rate.

Finance Secretary Subhash Garg attributed the slowdown to “temporary factors, like stress in the nonbanking financial company (NBFC) sector affecting consumption finance”.

The World Bank report said, “Growth in India is projected to accelerate to 7.5 percent in FY 2019-20.”

“Private consumption and investment will benefit from strengthening credit growth in an environment of more accommodative monetary policy, and with inflation below the Reserve Bank of India’s target”, it added.

Growth projections for India made by different organisations vary a lot. Last month, the United Nations downgraded India's growth rate for the current fiscal year to 7 per cent, a cut of 0.6 percent from the projection made in January and reduced the forecast for the next fiscal year by 0.4 per cent to 7.1 percent. It estimated last fiscal year's growth rate to be 7.2 percent.

In April, the IMF cut India's growth projections for this year by 0.2 per cent from the 7.5 per cent made in January to 7.3 per cent. It projected next year's growth at 7.5 per cent, though lower than the earlier 7.7 projection.

The Asian Development Bank said in April that India's growth rate would be 7.2 per cent this year and 7.3 per cent next year.

China’s economy grew by 6.6 percent last year and is forecast to grow by 6.2 percent this year and further decelerate to 6.1 percent next year and 6 percent in 2021, the World Bank said.

Pakistan was estimated to have grown by 5.2 percent last year, but is forecast to steeply decline to 3.4 percent this year and 2.7 percent next year, before recovering to 4 percent in 2021, according to the report.

This despite “financial assistance from Gulf countries and China and an International Monetary Fund programme (that) have helped rebuild confidence”, it said. Last year, the report said, Bangladesh recorded a growth rate of 7.9 percent – the highest of all nations, regardless of size, although with a GDP of only about USD250 billion, or less than a tenth of India’s, it is not considered a major economy. Bangladesh’s growth is forecast to fall to 7.3 percent this year, the Bank reported. It is forecast to rise to 7.4 percent next year and dip to 7.3 percent in 2021.