India's economy is projected to grow at 7.6 per cent in 2017 as investment regains momentum and manufacturing base strengthens on the back of structural reforms in the country, a UN study said, crediting India and China for the steady growth of the Asia-Pacific region.
"India's economy is projected to sustain a 7.6 per cent growth rate in both fiscal years 2016-17 and 2017-18," says the year-end update of the flagship report Economic and Social Survey for Asia and the Pacific 2016 of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
The report said India's economic growth is expected to remain at 7.6 per cent in 2017 as investment regains momentum and the manufacturing base strengthens on the back of structural reforms.
The ongoing structural reforms are also expected to benefit private investment in India.
It said in India while growth in the first quarter of the current fiscal year (April-June 2016) moderated due to a contraction in fixed investment, a rebound is expected.
"Initially, growth will be driven by a rebound in agriculture due to normal monsoon rain, which along with civil service pay revisions will support broad-based consumption growth.
"Later, growth will be underpinned by a recovery in private investment as the recent push to accelerate infrastructure spending and measures to create a better investment climate -- due in part to the passage of the goods and services tax and bankruptcy code," it said.
The economic growth rate in China is projected to ease slightly to 6.4 per cent in 2017 as rebalancing towards consumption, services and higher value-added activities makes further progress, it added.
The report credited India and China as being the anchors of a high and steady growth of the Asia-Pacific region at a time when developed economies were struggling to sustain high growth rates.
"With developed economies losing some of their recovery momentum, the region's high and steady growth rate, led by China and India, has arguably been an anchor of stability for the struggling global economy," it said.
The report added that fiscal institutions are being improved, with China moving away from off-budget spending and implicit guarantees and India taking a major step towards putting into effect a nationwide goods and services tax.
Further, deleveraging and restructuring efforts in countries such as China and India should contribute to enhance financial stability and higher productivity.
The report pointed out that stable economic conditions in the second half of 2016 provide an opportunity to internalise the economic, social, environmental and governance dimensions of sustainable development in a comprehensive manner.
It said resilient domestic demand and policy support have resulted in the region’s developing economies growing at a steady pace of just below five per cent despite sluggish global economy and weak trade growth, according to the report.
UN Under-Secretary-General and ESCAP Executive Secretary Shamshad Akhtar emphasised that despite the overall positive outlook, the potential impact of some risks should not be underestimated.
"Bouts of financial volatility can re-emerge due to external policy uncertainties in major economies, including those related to the 'Brexit' negotiations in Europe and the new administration in the United States of America, as well as vulnerabilities on the domestic front, such as those on corporate and bank balance sheets," she said.
"External demand is likely to remain weak, with trade protectionist measures and sentiments, which are already on the rise, resulting in prolonged weakness in global trade and a drag on productivity growth," she added.