India's economic growth is expected to improve to 6.3 per cent in 2016 with the country leading economic recovery in South Asia, according to a United Nations report.
The UN World Economic Situation and Prospects 2015 (WESP) report, launched here yesterday, also said India is likely to make progress in implementing economic policy reforms and help provide support to business and consumer confidence.
It said global economic growth is forecast to continue increasing over the next two years, despite legacies from the financial crisis continuing to weigh on growth, and the emergence of new challenges, including geopolitical conflicts such as in Ukraine, and the Ebola outbreak in West Africa.
The global economy is expected to grow 3.1 per cent in 2015 and 3.3 per cent in 2016, compared with an estimated growth of 2.6 per cent for 2014, when the pace of expansion has been moderate and uneven.
It said India, which is estimated to record a 5.4 per cent economic growth in 2014, will see GDP growth improving to 5.9 per cent next year and 6.3 per cent in 2016.
Economic growth in South Asia is also set to gradually pick up from an estimated 4.9 per cent in 2014 to 5.4 per cent in 2015 and 5.7 per cent in 2016.
"While the recovery will be led by India, which accounts for about 70 per cent of regional output, other economies such as Bangladesh and Iran are also projected to see stronger growth in the forecast period," the report said.
The about six per cent growth projected for India in 2016 will be the highest since the 2008-2011 period when it had grown at about 7.3 per cent.
Economic growth had slowed to 4.7 per cent in 2012, according to the UN report.
During 2014, East Asia, including China, managed to register relatively robust growth, while India led South Asia to a moderate strengthening.
Developing countries as a group are expected to grow at 4.8 per cent in 2015 and 5.1 per cent in 2016, up from the 4.3 per cent estimated for 2014.
The report added that along with robust external demand, growth is expected to be underpinned by a moderate strengthening of domestic consumption and investment as countries benefit from improved macroeconomic conditions.
"Several countries, notably India, are likely to make progress in implementing economic policy reforms, thus providing support to business and consumer confidence," it said.
The report, however, warned of significant downside risks for the South Asian region due to the continuing fragility of the global economy and considerable country-specific weaknesses, including political instability and the agricultural dependency on the monsoon.
Average inflation for developing economies will also fall slowly over the outlook period.
While inflation for East Asia will stay around the recent levels of 2–3 per cent over the outlook period, a pronounced decrease is forecast for South Asia due to falling inflation in almost all countries, especially in India and Iran.
Regional average inflation for South Asia is projected to decrease gradually from 14.7 per cent in 2013 to 7.2 per cent in 2016.
Apart from India, the baseline forecast projects a moderate growth recovery in 2015 and 2016 for almost all emerging economies, including Brazil, Indonesia, Mexico, Russia, South Africa and Turkey.
"While some economic indicators are positive and moving in the right direction which points to the potential for a gradual return to consistent economic growth, many risks and uncertainties could dash efforts to get the global economy on track and moving forward," Director of the Development and Policy Analysis Division for the UN Department of Economic and Social Affairs Pingfan Hong said.
The US economy is expected to improve in 2015-2016, with GDP projected to expand by 2.8 and 3.1 per cent, respectively.
The forthcoming further normalization of the US Federal Reserve’s monetary policy posed significant risks and uncertainties for the global economic outlook, depending on the timing and strategy of the monetary tightening, as well as the response by financial markets, the report said.
Only a slight improvement in growth is expected in Western Europe from 1.7 per cent in 2015 to two per cent in 2016.
The region is held back by the travails of the euro area, where the level of GDP has yet to regain its pre-recession peak. To reduce risks and meet challenges, the report says, it is imperative to strengthen international policy coordination.
In particular, macroeconomic policies worldwide should be aligned toward supporting robust and balanced growth, creating productive jobs, and maintaining long-term economic and financial stability.