The World Bank said the Indian economy has turned the corner and urged the government to unlock investment.
In the India Development Update, released Tuesday, the bank said the economy is expected to expand 7.5 percent in 2015-16, before accelerating to 7.9 percent in 2016-17 and 8 percent in 2017-18.
Nonetheless, the Washington-based bank said the acceleration in growth is conditional on the growth rate of investment picking up to 11 percent in FY 2016-FY18.
In order to achieve higher investment growth, it called for fiscal reforms that protect public capital spending; financial sector reforms; and reforms in the business environment.
“India needs to explore alternative channels for long-term investment while reviving the PPP model of financing to meet India’s yawning infrastructure gap,” Poonam Gupta, a senior economist at World Bank said.
The economist noted that simultaneous efforts to increase the tax-to-GDP ratios through the timely implementation of the Goods and Services Tax and complimentary measures to improve tax administrations can generate fiscal space in the years ahead.
The update cautioned on the risks from potential tightening of the U.S. monetary policy. “While the Reserve Bank of India has taken preventive measures to reduce external vulnerability, and has built international buffers as a “first line of defense”, the risk remains, warranting vigilance,” Gupta added.
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