World Bank on 27 October 2014 released its bi-annual report India Development Update. In the report, the World Bank has emphasized on continuing domestic reforms and encouraging investments so as to achieve higher growth rates.
The report said that India's GDP is likely to grow by 5.6 percent in the financial year (FY) 2014-15 and GDP growth is likely to rise further to 6.4 percent in FY 2015-16 and 7 percent in FY 2016-17.
It further said that, growth is expected to accelerate as proposed measures such as the Goods and Service tax will give a boost to the manufacturing sector.
It also said that implementing the Goods and Services Tax (GST) will help transform India into a common market, eliminate inefficient tax cascading, and go a long way in boosting the manufacturing sector.
Highlights of the report
• It said that simply by halving the delays due to road blocks, tolls and other stoppages could cut freight times by some 20-30 percent and logistics costs by an even higher 30-40 percent.
• This measure would result in boosting competitiveness of India’s key manufacturing sectors by 3 to 4 percent of net sales, thereby helping India return to a high growth path and enabling large scale job creation.
• WPI inflation is expected to moderate to 4.3 percent in the FY 2014-15, from 6.0 percent in the previous FY 2013-14
• The FY 2014 current account deficit of 1.7 percent is expected to widen marginally to 2.0 percent as import demand picks up and capital inflows rise.
• Fiscal consolidation is expected to continue through expenditure restraint, although there is room for revenue mobilization to strengthen, the Update cautions.
Apart from these things, the World Bank in the report said that India’s favorable demographics, relatively high savings, recent policies and efforts to improve skills and education, and domestic market integration makes longer term growth potential of India, high.
At the same time, the Update also said that at the domestic end, the risks include challenges to energy supply and fiscal pressures from weak revenue collection in the short term. However, risks could be mitigated to a large extent by focusing on reforms that help the manufacturing sector.
• World Bank Country Director in India: Onno Ruhl