The World Bank has released a recent projection stating that India’s economy will grow over 6% in the 2014-2015 year, and at over 7.1% in the 2016-2017 year as global demand recovers and domestic investment increases.
Meanwhile, in China, growth is estimated to remain flat at 7.7% in 2014, and then slowing to 7.5% in the next two years, reflecting deleveraging and less reliance on policy-induced investment. Global GDP growth may improve to 3.2% this year, a .8% increase from 2013’s 2.4% growth rate, and stabilizing at 3.4% and 3.5% in 2015 and 2016, respectively, projected in The World Bank’s Global Economic Prospects (GEP) report released this morning.
According to the report, global economic performance is projected to strengthen this year, with growth picking up particularly in high-wealth economies as well as developing economies appearing to finally turn a corner after the 5-year recession caused by the 2008 global financial crisis. “Growth appears to be strengthening in both high-income and developing countries, but downside risks continue to threaten the global economic recovery,” said World Bank Group President Jim Yong Kim.
According to the report, in South Asia, weaker growth in India, following several years of rising inflation and current account deficits, has opened up a large negative output gap, which is projected to gradually close as the economy slowly recovers. Better Indian performance will be heavily reflected in the region’s growth, which is expected to strengthen to 5.7 per cent in 2014 and about 6.7 per cent in 2016, it said. To date, growth in South Asia, a generally high-growth market, has been disappointing, growing at 4.6% in 2013, mainly due to a weakening Indian economy. However, at the end of 2013, growth appeared to be rebounding, and regional GDP on a calendar-year basis is projected to slowly accelerate to roughly 6.7% in 2016, mainly reflecting strengthening in India, as well as cyclical recovery in investment and external demand, the report said.
Pakistan’s growth is expected to moderate slightly at 3.4% in 2013-2014, reflecting necessary fiscal tightening, and then increase to 4.5% in the medium term. According to Kaushik Basu, Chief Economist and Senior Vice President at the World Bank, the global economic indicators show improvement. But one does not have to be especially astute to see there are dangers that lurk beneath the surface, he said, adding that the euro area is out of recession but per capita incomes are still declining in several countries, specifically the PIIGS (Portugal, Ireland, Italy, Greece, and Spain).
According to the report, remittances growth in South Asia has moderated to 6.8% in 2013 from 9.7% from the previous year. India, with large current account and fiscal deficits and weaker growth, was hit particularly hard by a withdrawal of portfolio capital (resulting in steep currency depreciation) in the middle of the year, stemming from apprehensions of tapering of US quantitative easing, the Bank said.