The U.N Economic and Social Survey of Asia and the Pacific for 2016 has described India as the fastest-growing large economy in the world. In its report, released in Bangkok on Thursday, it noted that economic growth in India edged up to 7.6% in 2015 compared with 7.3% in 2014. The UNESCAP survey said that private consumption growth continued to be the main growth driver, as reflected in robust services activities relating to trade, finance, transport and communications, and real estate. However, strong household consumption was not broad-based; rural demand was weaker due to muted agricultural activity and slower rural wage growth resulting from sub par monsoon seasons in recent years.
On the external front, the UNESCAP survey said that merchandise exports of India declined on weak orders in advanced economies and lower prices of refined petroleum products, which accounted for more than 13% of Indiaâ€™s total exports. However, as imports also shrank and services exports remained in surplus, the current account deficit narrowed to about 1% of GDP in 2015. Referring to inflation, it said that despite a spatially uneven monsoon and some seasonal spikes in food prices, consumer inflation moderated to 5% in 2015 from 6.7% in 2014. Lower inflation was driven by low global commodity prices, a downward adjustment in administered fuel prices and government measures, such as price checks, anti-hoarding and suspension of futures trading of select pulses. Moderate inflation enabled the Reserve Bank of India to cut policy rates by a total of 125 basis points in 2015.
The Survey termed the near-term growth outlook as positive, and projected the growth rate at 7.6% in 2016 and 7.8% in 2017. It noted that urban household spending is expected to drive economic growth amid steady employment growth and relatively low inflation. Fixed investment conditions would benefit from lower borrowing costs and a more enabling business environment, as reflected in Indiaâ€™s better ranking in the World Bankâ€™s ease of doing business index. Nonetheless, high levels of stressed bank assets and fragile business confidence could constrain investment growth.
The Survey said that the overall strength of domestic demand will depend on progress made in implementing structural reforms and how rapidly large scale stalled infrastructure projects are unlocked. It observed that some progress has been made in reforming fiscal policy, such as the rationalization of fuel price subsidies, but the implementation of the goods and services tax (GST) remains an important reform that is being held up due to political deadlock.
On the Government’s recent initiatives to promote inclusive and sustainable development, the Survey said that these measures include programmes to support small and medium-sized enterprises through enhanced credit under the Micro Units Development and Refinance Agency bank loan scheme; foster financial inclusion through the Jan Dhan programme under which 250 million people have gained access to modern banking services; create a skilled workforce under the Skill India initiative; make India a manufacturing base; and promote entrepreneurship under the Start up India, Stand up India initiative.
The Government is also placing emphasis on developing sustainable cities under the 100 Smart Cities mission, and harnessing solar and wind energy, with the target being to attain 175 gigawatts of renewable generation capacity by 2022, it said.