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India's economic growth is poised to inch up 4.9% in 2014 and is expected to gain momentum with a decline in "political uncertainty" after the general elections, although rising bad loans would weigh on recovery, Paris-based think-tank OECD said today.
The estimate by the Organisation for Economic Cooperation and Development (OECD) for 2014 is higher than 4.5% growth projected for 2013.
India's GDP is expected to pick up further momentum and grow 5.9% in 2015, according to OECD's latest economic outlook report.
The Indian economy has slowed and growth plummeted to a decade-low of 4.5% in 2012-13.
"Growth is expected to gather momentum. Investment should recover as projects cleared by the Cabinet Committee on Investment are implemented and political uncertainty declines after the May 2014 general elections," OECD said.
Counting for the nine-phase Lok Sabha polls is scheduled on May 16.
According to the grouping of 34 countries, the rupee's depreciation over the summer of 2013 and firming external demand would underpin export growth, while the rise in rural incomes and the decline in inflation would boost consumption.
"However, fiscal consolidation and supply bottlenecks, coupled with still high non-performing loans and corporate leverage, will weigh on the recovery," it added.
Non-performing assets, or bad loans, of state-owned banks rose 28.5% to Rs 2.36 lakh crore in September last year from Rs 1.83 lakh crore in March 2013.
"Implementing the proposed inflation targeting framework will help anchor price expectations and improve business sentiment and consumer confidence," the report said.
Retail inflation measured in terms of the Consumer Price Index increased to 8.31% in March from 8.03% in February.
