With the new Indian government showing signs of economic reforms and brings in transparency in governance, the World Bank feels that the world's third-largest economy could achieve a growth rate of 5.5 per cent this year as compared to 4.7 per cent last year.
"I think there is, overall a sense that that recognition of the need for domestic solutions to policies is increasingly evident in India, as well," World Bank economist Andrew Burns told reporters during a conference call.
Burns, lead author of the World Bank global economic outlook and the head of the team in the Macro Group, said, "The situation in India has obviously gone through a difficult period for the last couple of years, with growth below 5 per cent after several years after it was eight and even higher."
"Much of that has been a reflection of this process of being overheated and over-inflated, and a natural slowing of the economy. But there has also been a concern that the domestic reform process had lost momentum," Burns said.
"We saw early signs, I think, even before of the election, of a deb locking of some of these obstacles. We saw a number of investment projects that had been held back being given the go-ahead. And all of that is part and parcel of our forecast which, for India, is for growth to accelerate from 4.7 per cent last year to 5.5 per cent this year, 6.3 per cent next year, and 6.6 per cent in 2016," Burns said.
According to the report, GDP growth in South Asia slowed to an estimated 4.7 per cent in market price terms in calendar year 2013 (2.6 percentage points below average growth in 2003-12). This weakness mainly reflects subdued manufacturing activity and a sharp slowing of investment growth in India.
Firming global growth and a modest pickup in industrial activity should help lift South Asia's growth to 5.3 per cent in 2014, rising to 5.9 per cent in 2015 and 6.3 per cent in 2016.
Most of the acceleration is localised in India, supported by a gradual pickup of domestic investment and rising global demand.