The World Bank on Thursday retained India’s economic growth rate at 7.5 per cent for the current financial year on back of increase in capital expenditure. The retention of estimates are unlike those of the International Monetary Fund (IMF) which earlier this year revised India’s GDP growth rate to 7.4 per cent from an earlier estimate of 7.5 per cent for 2015-16.
The World Bank, however, lowered India’s GDP growth to 7.8 per cent in 2016-17 and to 7.9 per cent in 2017-18. The earlier update, released in April had pegged GDP growth at 7.9 per cent next fiscal and at 8 per cent in 2017-18.
In its latest India Development Update released on Thursday, it noted, “While growth will very likely remain above seven percent in the next fiscal year, there is significant uncertainty about the momentum of the economy.”
It added that further acceleration in growth would be dependent on the investment rate picking up to 8.8 per cent over the next two financial years.
The report stated, “Although India may be able to achieve fast GDP growth without export growth for a short period, sustaining high rates of GDP growth over a longer period will require a recovery of export growth,” adding that though India is well positions to weather the global volatility in the short term, the country will not remain immune to a slowdown in global demand and heightened volatility in the medium term.
The report raised concerns about the high level of bad loans in the country’s state-run banks. The World Bank said the increase in non-performing assets of banks is largely because of financially stressed infrastructure companies.
Though firms in the power, roads and ports sectors are under most stress, electricity distribution companies are also
a significant fiscal risk. Besides, there has been a decline in credit growth particularly in public-sector banks as moderating inflation rates has reduced need for working capital loans.