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India will Catch-up with China's Growth: World Bank
Jan 21, 2015

India's economic growth should finally catch up to China's next year and in 2017, at a clip of about 7 per cent. The World Bank in its Bi-yearly Global Economic Prospects report on however lowered its global growth forecast for 2015 and next year due to disappointing economic prospects in the Euro zone, Japan and some major emerging economies that offset the benefit of lower oil prices.

Main Points

  • The World Bank predicted the global economy would grow 3 per cent this year, below a forecast of 3.4 per cent made in June.

  • World GDP growth will reach 3.3 per cent in 2016, as opposed to a June forecast of 3.5 per cent, before dipping to 3.2 per cent in 2017.

  • The global economy is at a disconcerting juncture. It is as challenging a moment as it gets for economic forecasting.

  • The world economy has been more sluggish than expected since the 2007-2009 global financial crisis.

  • Growth prospects in the United States and Britain separated them from other rich nations, including members of the Euro zone and Japan, which continue to face weak economies and deflation fears.

  • The global economy is running on a single engine...the American one. This does not make for a rosy outlook for the world.

  • Among emerging markets, Brazil and Russia in particular weighed on along with China, which is in a managed slowdown as it transitions away from an investment-led growth model.

  • The World Bank predicted the roughly 60-per cent drop in global oil prices since June of last year should be a net positive for the world economy, boosting oil-importing countries.

  • The World Bank expected oil prices to stay low this year, the positive price shock could take several years to feed into its growth outlook, while increasing short-term market volatility and reducing investments in unconventional oil such as shale and deep sea oil.

  • The immediate impact of lower crude prices was limited to a 0.1 percentage point boost to the global outlook this year.

  • Falling oil prices could also depress inflation around the world.

  • Fears of deflation, along with overall gloomier global prospects and stagnant US wages, could encourage the US Federal Reserve to raise interest rates more slowly than anticipated.


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