Indian economy to grow at 7.5% in 2015

India’s gross domestic product (GDP) is expected to grow at 7.5 per cent in 2015, a report released by the United Nations Conference on Trade and Development (Unctad) has said.

In the ‘Trade and Development Report 2015’ released on Tuesday, Unctad pointed out that lower oil prices have eased current account deficits in countries, such as Pakistan and India.

The UN body’s growth estimates are in line with the projections made by the World Bank, and ratings agency Fitch. The RBI, too, revised downwards its projections for GDP growth to 7.4 per cent from 7.6 per cent earlier. India’s growth projection, however, is higher than that of most economies in the world.

China’s growth is likely to slow down to 6.9 per cent in 2015 (from 7.4 per cent in the previous year), as it rebalances the structure of its demand by concentrating more on exports, the report said.

Public expenditure

While growth in the global economy for 2015 is expected to remain unchanged from last year at 2.5 per cent, the report warned that rich countries needed to boost demand by increasing public expenditure if a global slowdown is to be avoided.

“Doubts remain, in particular, over the strength of the European and Japanese recoveries. Even in the US, where the post-crisis recovery looks most solid, household balance sheets remain fragile and the appreciating dollar is hurting the contribution of net exports to GDP growth,” it said.

Increase in public expenditure, such as on infrastructure, has shown very substantial positive multiplier effects in stagnating economies; so public investment should be a key instrument for addressing the so-called secular stagnation now being seen in developed countries, the report added.

Long-term horizon

“The report is a wake-up call for developed countries to take action before things get out of hand and we head towards another crisis. Private capital should move out of short-term investments and look at long-term horizon to participate in the development process of developing countries,” Biswajit Dhar, Professor, Centre for Economic Studies and Planning, JNU, pointed out.

If secular stagnation originates on the demand side, containing labour income and reducing public spending could worsen, rather than solve the problem, the report said.