The World Bank on Friday lowered India’s growth projection to 5.5% from the earlier forecast of 5.7% for 2014-15 and warned that the impending crisis in Iraq, which has the potential to inflate the oil bill, can hinder the country’s economic recovery.
“Iraq is a big concern and extremely unpredictable… India, being an energy-deficient country, could be faced with increased fiscal pressures on the fuel side,” Onno Ruhl, country director India, World Bank, told reporters after releasing the report on Global Economic Prospects 2014.
Ahead of the NDA government’s first budget in July, the World Bank also suggested implementation of reforms such as rolling out of Goods and Services Tax (GST), improving business environment by removing bottlenecks and managing subsidies to put India back on the high-growth trajectory.
According to the GEP 2014 report, India’s growth rate is set to accelerate to 6.3% in 2015-16 and 6.6% in 2016-17.
“With rising global demand, we expect that a rebound in domestic investments and a pick-up in manufacturing activities will help India move from two years of sub-5% growth to over 6% in the next year,” Ruhl said.
However, inflation and the impact of the El Nino (a weather phenomenon in the Pacific), rise in non-performing assets of the banking sector and weak investments continue to pose challenges for India.