(Image source from: Economist Kaushik Basu)
World Bank has forecasted that India will meet China's growth at 7% in the year 2016-17,India's economy has recovered in the wake of the economic reformation process by the India's new government led by Narendra Modi, falling oil prices and lower interest rates.
"India will catch up with China's growth in the year 2016 and 2017," World Bank Chief Economist and Senior Vice-President Kaushik Basu told reporters here. "China's growth will remain high, but will begin to taper very gently, reaching 6.9 per cent in 2017," he said at a program to release the 'Global Outlook: Disappointments, Divergences, and Expectations Global Economic Prospects'.
The World Bank in its report predicted that India will reach a growth rate of 7% each in the fiscal year 2016 and 2017 as against China's 7% and 6.9% respectively. In its report, the bank said growth in South Asia rose to an estimated 5.5% in 2014 from a 10-year low of 4.9% in 2013.
"The upturn was driven by India, the region's largest economy, which emerged from two years of modest growth," it said.
According to the report, Regional growth is projected to increase to 6.8% by 2017, as reforms facilitates free move of commodities and investment and reduced supply constraints in India, political tensions subside in Pakistan, remittances remain robust in Bangladesh and Nepal, and demand for the region's exports firms.
"Past adjustments have reduced vulnerability to financial market volatility. Risks are mainly domestic and of a political nature. Sustaining the pace of reform and maintaining political stability are key to maintaining the recent growth momentum," the report mentioned.
According to the bank, Reformation process and government’s interest on disinvestment and FDI, "Investment, which accounts for about 30% of GDP, should strengthen, and help raise growth to 7% by 2016, although this is contingent on strong and sustained progress on reforms. Any slackening in the reform momentum could result in a more modest or slower pace of recovery," it added.
Good condition of the exports and minimized imports of oil and other precious goods will lead India to make good revenue and the current account deficit reductions shows the positive economic situation in growth speculation.