The World Bank on Wednesday projected that India would remain comfortably the fastest growing large economy in 2016, at a rate more than a percentage point higher than China’s.
In its report Global Economic Prospects, the Bank projected the Indian economy to grow at 7.8% in 2016 and China’s to grow at a more modest 6.7%. The world economy as a whole would grow at 2.9% it estimated, a modest upturn from the 2.4% growth estimated for 2015.
All of these estimates represent a downward revision from the projections made in June 2015, but the downward revision of 0.1 percentage points in India’s case is less than the 0.3 percentage point adjustment in the estimate for China or the reduction of 0.4 percentage points in the reckoning of global growth.
With Bangladesh projected to grow at 6.7% and Pakistan at 5.5%, South Asia will be the world’s fastest growing region according to the report. Among the other BRICS economies, Russia’s economy is projected to shrink by 0.7% in 2016 and Brazil’ by 2.5%, hit by the slump in global commodity prices while South Africa is expected to see its economy grow very slowly at 1.4%.
While making these projections, the Bank report introduced a caveat saying that “a faster-than-expected slowdown in China combined with a more protracted deceleration in other large emerging markets is a risk”. It said this remained a low-probability scenario, but if it did happen there could be a significant contagion risk for the rest of the world.
“Compounding this risk is the possibility of a protracted decline in potential growth throughout emerging and developing economies, persistently subdued growth in major high-income countries, and an escalation of geopolitical tensions,” the report warned, adding that a sudden readjustment of expectations about the future trajectory of US interest rates could also play a destabilizing role by combining with domestic fragilities and policy uncertainties in some developing countries.
Looking beyond 2016, the prospects, as the Bank sees it are not very much brighter, with the global economy estimated to grow by 3.1% in both 2017 and 2018, India expected to grow at 7.9% in each of those years and China at 6.5%.