The year-end update of the flagship report Economic and Social Survey for Asia and the Pacific 2016 conducted by the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) shows that India’s economy will grow at 7.6% in the 2017-18 fiscal year. A statement issued by the UN said, “India’s economy is projected to sustain a 7.6% growth rate in both fiscal years 2016-17 and 2017-18.” The investments have gained momentum again after India saw a sluggish pace in the April-June period at 7.1%, in comparison to a very high economic growth at 7.9% in the January to March phase. This gain in momentum in investments has been credited to the structural reforms in the country as per the UN study.
While developed economies are struggling to sustain high growth rates, India and China have been credited as being the anchors of a high and a steady growth on the economic front in Asia-Pacific region. The UN study said, “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.”
The reasons for the regain in economic growth
While the April-June period saw the economic growth falling below expectations because of sluggish investments and farm outputs, the following factors could have contributed to the regain in momentum:
- India is the world’s tenth largest economy and the second most populous. The most important and the fastest growing sector of Indian economy is the services sector. Trade, hotels, transport and communication, financing, insurance, real estate and business services and community, social and personal services account for more than 60 percent of the nation’s GDP. Manufacturing accounts for 15 percent of GDP. The nationwide implementation of the GST (Goods & Services Tax) has been credited with being the major reason for the sustained economic growth in India.
- Bountiful rain during the monsoon this year has helped the agricultural sector with optimum outputs.
- Civil Service pay revisions will also help support broad-based consumption growth.
- Steps taken to create a better investment climate such as the passage of the long-awaited insolvency and bankruptcy code and further easing of limits on foreign direct investment, have helped in increasing public infrastructure investments.
- There is also the hope that private investments will also gain momentum and thus help in the overall growth of the Indian economy.
- Leveraging and restructuring efforts may also be contributing in enhancing financial stability and higher productivity.
- Last, but not the least, according to the UN Report, resilient domestic demand and policy support have resulted in the Asia Pacific region’s developing economies growing at a steady pace of just below five per cent despite sluggish global economy and weak trade growth.
The economic growth rate in China is projected to ease slightly to 6.4% in 2017 from 6.9% in 2016.
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