India bright spot amid weak global growth: World Bank

A new World Bank report released Wednesday said emerging market economies that led the global recovery from the 2007-08 financial crisis are slowing down, with one exception, India.

A new World Bank report released Wednesday said emerging market economies that led the global recovery from the 2007-08 financial crisis are slowing down, with one exception, India.

The World Bank also warned that failure to pass the Goods and Services Tax (GST) bill by Parliament could hamper the Indian government’s ability to ramp up spending on infrastructure.(AFP File Photo)

It called India-led South Asia a “bright spot” in an otherwise gloomy outlook for emerging markets, using a phrase that has come to be used regularly in the recent months for India.

India is projected to grow at 7.8% in 2016, the World Bank said.

Despite the slowdown of emerging economies, most notably China, global growth is projected to touch 2.9% in 2016, against 2015’s 2.5%, the World Bank said its report “Global Economic Prospects”.

Growth in China is projected to slow down even more, and Russia and Brazil — the other emerging markets — will continue to grapple with recession in 2016, it said.

“The South Asia region is projected to be a bright spot in an otherwise gloomy outlook for emerging and developing economies, with growth accelerating to 7.3% in 2016,” it said.

What’s working for India? Top of the World Bank’s list is its “reduced external vulnerabilities”, which will help it withstand volatility in global financial markets. Secondly, “a strengthening domestic business cycle” and, thirdly, a “supportive policy environment”, which is a reference to ongoing, and speeded up reforms.

Low gas prices will help, of course, as with other economies of the region, but, the report said, low inflation and higher government wages will fuel demand and urban spending.

It said India, which accounts for 90% of investment inflows into the region, “should remain attractive to investors in comparison to other major emerging market”.

But there’s bad news as well. “Political standoffs in India could stall reforms,” the bank said. “A failure to pass the Goods and Services Tax and land reforms could constrain spending on infrastructure and impede a stronger recovery in private investment.”