Washington: With an “ambitious government undertaking comprehensive reforms”, India has “enormous growth potential” compared to other emerging economies, the World Bank said today, as it projected country’s growth rate to 7.3% in 2018 and 7.5% for the next two years.
India, despite initial setbacks from demonetisation and Goods and Services Tax (GST), is estimated to have grown at 6.7% in 2017, according to the 2018 Global Economics Prospect released by the World Bank here today.
“In all likelihood India is going to register higher growth rate than other major emerging market economies in the next decade. So, I wouldn’t focus on the short-term numbers. I would look at the big picture for India and big picture is telling us that it has enormous potential,” Ayhan Kose, Director, Development Prospects Group, World Bank, said.
He said in comparison with China, which is slowing, the World Bank is expecting India to gradually accelerate.
“The growth numbers of the past three years were very healthy,” Kose, author of the report, said.
In 2017, China grew at 6.8%, 0.1 per cent more than that of India, while in 2018, its growth rate is projected at 6.4%. And in the next two years, the country’s growth rate will drop marginally to 6.3% and 6.2%, respectively.
To materialise its potential, India, Kose said, needs to take steps to boost investment prospects.
There are measures underway to do in terms of non- performing loans and productivity, he said.
Noting that India has a favourable demographic profile, he said it is rarely seen in other economies.
Reducing youth unemployment is critical, and pushing for private investment, where problems are already well-known like bank assets quality issues…If these are done, India can reach its potential easily and exceed, Kose asserted.
“In fact, we expect India to do better than its potential in 2018 and move forward,” he said. India’s growth potential, he said, would be around 7% for the next 10 years.
The Indian government is “very serious” with GST being a major turning point and banking recapitalisation programme is really important, Kose said.
These reforms, of course, will bring certain policy uncertainty, he said, “but the big issue about India, when you look at India’s growth potential and our numbers down the road 2019 and 2020, is that it is going to be the fastest growing large emerging market.”
Then, of course, the late 2016 demonetisation reform was there. The government is well aware of these short-term implications,” Kose said.
He said there might have been some temporary disruptions but “all in all” the Indian economy has done well.
“The potential growth rate of the Indian economy is very healthy to 7%. I think the growth is going to be at a high rate going forward,” the World Bank official said.