The World Bank has predicted a GDP growth rate of 8 percent for India by 2017 and that a strong expansion in the country, coupled with favourable oil prices, would accelerate the economic growth in South Asia. GDP growth is expected to accelerate to 7.5 percent in the fiscal year 2015 / 16. It could reach 8 percent in the FY 2017 / 18, on the back of significant acceleration of investment growth to 12 percent during the FY 2016 - FY 2018, the bank said in its semi-annual report. India is attempting to shift from consumption to investment-led growth, at a time when China is undergoing the opposite transition, it said.
“The biggest oil price dividend is to be cashed in by South Asia is the one yet to be earned, but it is not the one that will automatically transit through government or consumer accounts,” said World Bank South Asia Chief Economist Martin Rama. “Cheap oil gives the opportunity to rationalize energy prices, reducing the fiscal burden from subsidies and contributing to environmental sustainability,” he said.
“Savings from reduced subsidy bills could be used to address the crying needs of the region in terms of infrastructure, basic services and targeted support for the poor,” said World Bank Vice President for South Asia Annette Dixon.
The report shows that households in the region stand to gain from lower oil prices, both directly through lower energy spending and indirectly through faster growth. The bank’s twice-a-year South Asia Economic Focus report projected steady increase in regional growth from 7 percent in 2015 to 7.6 percent by 2017 on grounds of strong consumption and increasing investment. The report also points that India has already taken encouraging steps to decouple international oil prices from fiscal deficits and to introduce carbon taxation to address the negative externalities from the use of fossil fuels.
Favourable food prices and cheaper oil has contributed to a rapid deceleration of inflation. South Asia has transformed from having the highest inflation rate among developing regions to the lowest in barely one year.
By Premji
