With reforms gaining momentum and macro-economic fundamentals improving, India's growth story was back on track, the World Bank said on Monday.
India's economy is set to grow 5.6% in 2014-15, 6.4% in 2015-16 and 7% in 2016-17, according to the latest India Development Update released by the Bank.
The country has seen sub-5% growth in the last two fiscal years.
Implementing Goods and Services Tax and dismantling inter-state check posts are critical to manufacturing revival, which in turn will aid growth. In fact, simply halving the delays due to road blocks, tolls and other stoppages could cut freight times by 20-30% and logistics costs by 30-40%, the report said.
"This alone can go a long way in boosting the competitiveness of India's key manufacturing sectors by 3 to 4% of net sales, thereby helping India return to a high-growth path and enabling job creation," it said.
"Benign oil prices and stronger performance in the US would also support recovery," said Denis Medvedev, senior country economist, World Bank India.
The projections could face risks from external shocks including financial market disruptions arising out of changes in monetary policies globally, slower global growth and rising oil prices.
"Implementing GST will eliminate inefficient tax cascading, and boost manufacturing… the impact of reform, particularly if enhanced by a systematic dismantling of inter-state check posts, can boost competitiveness and help offset risks to the outlook," Medvedev said, adding the pace of reform has accelerated but will need to be sustained.
Manufacturing accounts for around 16% of GDP in India compared to more than 20% in Brazil, China, Indonesia, Korea and Malaysia.