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World Bank cuts India’s growth projections to 7.6-7.7% for FY17 and FY18

08 Jun 2016 Evaluate

Amid sluggish corporate lending, World Bank in its Global Economic Prospects has cut India’s growth projections by up to three percentage points to 7.6-7.7 per cent for 2016-17 and 2017-18 from 7.9 per cent pegged earlier in January. Even then, India will continue to be the fastest growing major economy in the world.

World Bank in its report cautioned India against 'notable headwinds' stating that rural consumption has been hard-hit by two years of poor monsoons. It further said that despite five interest rate cuts since 2015, credit growth to the corporate sector remains sluggish because of stressed asset quality in the banking sector. It also said that private investment will still be held back by infrastructure bottlenecks, a challenging regulatory environment, and by tight credit amidst the ongoing resolution of stressed assets in the banking sector. On the global front, the Bank downgraded its 2016 global growth forecast to 2.4 per cent from the 2.9 per cent pace projected in January.

However, World Bank in its report said that growth in India picked up to 7.6 per cent in 2015-16, a 0.4 percentage point increase over that in 2014/15, driven largely by domestic demand. Further, it said that the government's planned investment in infrastructure, and the streamlining of business procedures and of the tax regime, are expected to alleviate some constraints, and crowd in private investment. It also added that the increased public investment in power generation, roads, railways and urban infrastructure is contributing to an improved business environment and reduced supply-side constraints

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