Projecting a growth rate of 7.5 per cent for 2015-16, the World Bank today suggested that India should step up economic reforms and encourage domestic companies to become "globally competitive".
"GDP growth (at market prices) is expected to accelerate to 7.5 per cent in 2015-16 reaching 8 per cent in 2017-18. Acceleration in growth is conditional on the rate of investment picking up to 11 per cent during FY16 to FY18...
"Low crude oil prices, improved production capacity and the adoption of the flexible inflation targeting framework, would likely keep inflationary pressures in check, inflationary expectations anchored and help prevent overheating in the medium-term," read the India Development Update released here today.
Recognising the government's efforts, the Update said it has embarked on an "energetic progress" in several policy areas and the pace of these efforts would need to be maintained or even stepped up to unleash the productivity and scale enhancement needed for the Indian firms to become "globally competitive".
"The government has made progress in several policy areas, and long-term prospects for growth remain bright for India. The current situation offers an opportunity to further strengthen the business environment and enhance the quality of public spending.
"Continuous strong momentum in these reforms will further unleash the productivity that Indian firms need in order to create jobs and become globally competitive," said Onno Ruhl, World Bank Country Director in India.
The World Bank said the Indian economy has been on the upturn in the past three quarters -- growth accelerated, inflation declined, the current account deficit narrowed and external buffers replenished.
"...Developing more policy space to the states may produce enclaves of competitiveness and help garner further support for wider reforms among the population and political classes across India."
It said decline in inflation and fiscal restraint generated some room for monetary accommodation, making it possible for the RBI to lower the policy rates twice in the last quarter of 2014-15.
To achieve higher investment growth, the India Development Update has suggested fiscal reforms that protect public capital spending, financial sector reforms and reforms in business environment -- all of which can help unlock private investments.
It drove home the need for a timely implementation of Goods and Services Tax (GST), rationalising current expenditures, especially on subsidies, delivering on disinvestment plans, ensuring greater tax buoyancy, encouraging public-private projects and addressing balance sheet issues of public sector banks.
