ADB sees India's GDP at 5.5% in FY15; expects revival further

Improved performance by industry and services is expected to drive India's economy to expand by 5.5 per cent in 2014-15 but this is well below potential and going forward the country will see renewed growth on improved investment and consumption, says an ADB report.
"We really had a dip in growth rate to 4.9 per cent in the year which ended yesterday. But we do expect some growth rate in the current year starting today at 5.5 per cent and further to 6 per cent, but this is well below the potential.
"Currently we are in phase of very slow industrial growth, contracting manufacturing output, weak investment and reduction in private consumption.

"Our belief is that India will come out of these problems and we will see renewed growth led by improved investment and consumption," Deputy Country Director, India Resident Mission of Asian Development Bank (ADB) Narhari Rao, said today while releasing 'Asian Development Outlook 2014' here.
Indian economy, according to Central Statistical Office (CSO), is estimated to record a growth rate of 4.9 per cent in 2013-14, up from decade's low of 4.5 per cent posted in the previous financial year. The economy has been growing at 9 per cent before the growth rate was pulled down by 2008 global financial meltdown.

"India's capacity for more rapid growth over the long-term is high, with a promising outlook for labour, worker skills, capital, infrastructure, and productivity," ADB Deputy Chief Economist Juzhong Zhuang said in a statement.

The growth is expected to rise further to 6 per cent in 2015-16 as the recovery in advanced economies will bolster external demand and government actions are likely to remove some structural bottlenecks impeding industry and investment, says the ADB report.
Much of the things will depend on how things turn out after elections, the kind of policy perusal and degree of freedom, Rao added.
"One of India's most pressing policy challenges is to create significantly more productive and well paying jobs. Such jobs are vital to sustain high growth and ensure it is inclusive," the report said.

Its Senior Economics Officer Abhijit Sen Gupta said India still suffers from very high inflation which is well above RBI's comfort level.
"I think Consumer Price Index inflation is probably going to be much more...We expect that to moderate. This is assuming that we don't face any adverse shock to food inflation from unexpected sources such as weak rainfall.
"Based on that we do expect CPI to moderate to 8 per cent but this 8 per cent is also higher than what the RBI's comfort zone is. We do expect monetary policy (of RBI) to remain high," Sen Gupta said.