Red Fort – a symbol of Indian strength to support 7.5% growth in 2015/16.
India is well positioned to withstand near-term headwinds and volatility in global financial markets due to reduced external vulnerabilities, a strengthening domestic business cycle, and a supportive policy environment, said the World Bank.
Although the pace of reforms has slowed somewhat, growth is expected to strengthen to 7.9 percent in FY2017/18, from an expected 7.5 percent in FY2015/16, it said in a Global Economic Prospects January 2016 report which was released this week.
Progress on infrastructure improvements and government efforts to boost investment are expected to offset the impact of any tightening of borrowing conditions resulting from tighter U.S. monetary policy. Such investment will also lift potential growth over the medium term, said the bank.
Low international energy prices and domestic energy reforms will ease energy costs for Indian firms that tend to be energy intensive.
Although rural incomes have suffered as a result of two successively weak monsoon seasons, urban spending has been supported by the decline in inflation, and will also benefit in the near term from public sector wage increases announced recently.
India accounts for more than 90 percent of portfolio and Foreign Direct Investment (FDI) inflows to the South Asian region. Better growth prospects relative to other major developing countries should help flows remain resilient during the transition to tighter global financing conditions (although there may be volatility in the near term), it said in an economic outlook in the report. fii-news.com
