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Identifying "risks", World Bank blames Opposition for blocking pro-industry land reforms in Upper House
Even as predicting that India might experience one of the highest rates of growth in the world over the next three years – 7.8 per cent in 2016, 7.9 per cent in 2017 and 7.9 per cent in 2018 – the World Bank believes that to maintain this rate of growth, the Government of India would do well to avoid “mainly domestic risks.”
Identifying the “risks”, a World Bank Group Flagship report, “Global Economic Prospects: Spillovers amid Weak Growth” says that these “include reform setbacks in the reform momentum”, suggesting this alone may have been reason why there was “an estimated 7.2 percent year-on-year in the first half of the 2015/16 fiscal year compared with 7.3 percent in FY2014/15 as a whole.”
Attacking the Opposition Congress in India for contributing to the “risks”, the World Bank supports the NDA’s socio-economic agenda of seeking to allow industry to buy up agricultural and tribal land more easily through the now aborted amendment to the Land Acquisition Act (LAA), 2013.
It insists, “In India, progress in reforms is not assured as the upper house of parliament, which the ruling party does not control, has the power to block the government’s legislative agenda.”
It adds, “Slow progress on land reforms could add to investment delays, and private investment growth may be unable to build further momentum.”
The World Bank says, “The financing of public-private partnerships also remains a challenge. A failure to pass the goods and services tax (GST) could hamper the government’s ability to ramp up spending on infrastructure needs and preserve the status quo of fragmented domestic markets.”
It further says, “In addition, although India has made good progress on reducing external vulnerabilities and strengthening the credibility of the macro policy framework, high levels of nonperforming loans in the banking sector, concentrated in construction, natural resource and infrastructure sectors, could impede a pickup in investment if left unaddressed.”
It adds, “There are also downside risks to growth in the near term from sub-par monsoon rainfall across most of India, and farm output growth may prove weaker than projected.”
At the same time, the World Bank suggests, there may be external reasons attached with the risks, too. It says, “A one percentage point decline in GDP growth in G-7 countries (Canada, France, Germany, Great Britain, Italy, Japan, and the United States) causes growth in India to fall by 1.7 percentage points.”
Giving main conditions under which India may achieve a high rate of growth, the World Bank says, these include, “Monetary and fiscal restraint, the fall in global crude oil prices and a moderation in food price inflation… and a narrowing of current account and fiscal deficits.”
“Momentum in industrial output has slowed and both the services and manufacturing Purchasing Managers’ Indices (PMIs) have softened”, it points out, though adding, “The investment cycle is gradually picking up, led by a government efforts to boost investment in infrastructure, particularly roads, railways and urban infrastructure.”
Advising the South Asian countries to boost their trade ties, the World Bank says, “As a share of GDP, intra-regional exports are smaller than anywhere else in the world. On average, India, Pakistan, Sri Lanka and Bangladesh’s exports to each other amount to less than 2 percent of total exports."
It adds, “There are also downside risks to growth in the near term from sub-par monsoon rainfall across most of India, and farm output growth may prove weaker than projected.”
At the same time, the World Bank suggests, there may be external reasons attached with the risks, too. It says, “A one percentage point decline in GDP growth in G-7 countries (Canada, France, Germany, Great Britain, Italy, Japan, and the United States) causes growth in India to fall by 1.7 percentage points.”
Giving main conditions under which India may achieve a high rate of growth, the World Bank says, these include, “Monetary and fiscal restraint, the fall in global crude oil prices and a moderation in food price inflation… and a narrowing of current account and fiscal deficits.”
“Momentum in industrial output has slowed and both the services and manufacturing Purchasing Managers’ Indices (PMIs) have softened”, it points out, though adding, “The investment cycle is gradually picking up, led by a government efforts to boost investment in infrastructure, particularly roads, railways and urban infrastructure.”
Advising the South Asian countries to boost their trade ties, the World Bank says, “As a share of GDP, intra-regional exports are smaller than anywhere else in the world. On average, India, Pakistan, Sri Lanka and Bangladesh’s exports to each other amount to less than 2 percent of total exports."
It adds, "Average trade costs between country pairs in South Asia are 85 percent higher than between country pairs in East Asia reflecting border barriers, poor infrastructure and transport connectivity, and generally poor business environments.”
“However”, it regrets, “Unofficial trade (in narcotics, but also illegal food trade in the Punjab) is reported to be significant. Estimates of the size of unofficial trade vary between countries, with recent studies placing the value of Indian exports to Pakistan at about $1.8 bn (or nearly 1 percent of GDP).”
“However”, it regrets, “Unofficial trade (in narcotics, but also illegal food trade in the Punjab) is reported to be significant. Estimates of the size of unofficial trade vary between countries, with recent studies placing the value of Indian exports to Pakistan at about $1.8 bn (or nearly 1 percent of GDP).”
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