India’s economy to grow by 6.4% in fiscal 2015/16: World Bank

The World Bank in its twice-a-year South Asia Economic Focus noted that economic growth in South Asia is forecast to accelerate to 2016 led by an increase in activity in India. The Indian economy, 80 percent of the region’s output, is set to grow by 6.4 percent in fiscal year (FY) 2015/16 after 5.6 percent in FY2014/15. Other countries in the region are Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka.

The report spoke of India benefiting from a “Modi dividend”, with economic activity spurred by the expectations and positive sentiments towards the new Narendra Modi government.

India’s economic activity over the next year or so is expected to be pushed ahead by the recovering U.S. economy providing a market for Indian exports of merchandise and services. Also, private investment is expected to increase due to the government’s business orientation, and declining oil prices would boost private sector competitiveness. The report does caution that India would need to implement economic reforms to unlock and achieve its full long-term growth potential.

The positive hopes of growth of the Indian economy could further spearhead a more robust domestic demand and boost various industries, including the gem and jewellery sector, which is a key contributor to the country's exports.

The report noted India's long-term growth potential as highly positive, which it attributed to the favourable demographics, relatively high savings, and policies to improve skills and education, and developing and promoting manufacturing activities.

South Asian region’s economy will expand by a real 6 percent in 2015 and by 6.4 percent in 2016 compared to 5.4 percent this year, potentially making it the second fastest growing region in the world after East Asia and the Pacific, as per the report.

According to Martin Rama, Chief Economist for South Asia at the World Bank, “The outlook over the next years for South Asia indicates broad economic stability and a pick-up in growth with potential risks concentrated on the fiscal and structural reform side. Future growth will increasingly depend on strong investment and export performance.”

Also, South Asia has an opportunity to become the manufacturing hub of the world; but achieving this will require boosting competitiveness.