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The World Bank's GDP estimates hinge on...
Mon, 20 Jan Pre-Open

India is likely to be amongst the fastest growing developing economies over the next three years. At least, this is what the World Bank expects. Growth in the current fiscal is expected to fall to 4.8%, which would be lower by 0.2% as compared to the previous year. However, the bank expects the two years that follow to be good for the economy. The growth rates for FY15 and FY16 are estimated at 6.2% and 7.1% respectively.

The rationale for the sharply improving growth levels is the recovery of the developed nations. With the US, the Eurozone and Japan showing signs of improvement, the positive effect is expected to flow into the countries that cater to them directly or indirectly.

It may be noted that exports contribute nearly one-fifth of India's GDP. The same has nearly doubled from about a decade ago. However, the share of exports in the growth is much higher, which is why the World Bank may be expecting a boost in growth.

We believe one cannot afford to ignore the situation back home i.e. the domestic industries and sectors. Infrastructure, consumption and agriculture all will have to play a big part to improve growth levels. And if sentiments continue to be as uncertain and grim as they have been of late, then it seems unlikely for the growth rates to improve sharply. Inflation, policy paralysis, revival of investment cycle, much needed structural reforms, outcome of the upcoming general elections and immediate actions taken by the new government - all of these essential factors (amongst others) will play a big role in shaping the future.

Not to mention the fact that the fragile recovery in the developed nations - which are currently running on a sea of artificial liquidity - will continue to be in the radars of all, given that the news of reducing tapering or even ending it have started to make the rounds. If the regions that have resorted to such measures find themselves dependent on the same, it would definitely lead the World Bank to make changes to its estimates.

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