Better labour productivity, faster growth of the working age population and ambitious structural reforms will help India outperform other emerging economies over the next five years, according to Fitch Ratings.
The India economy is projected to grow at 6.7 percent per annum over the next five years – the fastest among emerging economies, the ratings agency said in a report. The forecast for India is ahead of the 5.5 percent growth estimated for China and Indonesia, which jointly ranked second highest.
The estimate is based on productivity growth which is expected to step up from a “disappointing historical track record in the aftermath of recent ambitious structural reforms”, Fitch said.
This projection comes after the rating agency last month cut the country's GDP growth forecast for the current fiscal to 6.7 percent, saying the rebound was weaker than expected. It, however, noted that GDP growth will pick up in the next two years on back of gradual implementation of structural reform.
Fitch's optimism on India is driven by the country's fast-rising population and productivity gains, as compared to other emerging economies. Reforms undertaken by the government such as the Goods and Services Tax and PSU bank recapitalisation should start to bear fruit, spurring greater efficiency in productivity, the rating agency said.
Private investment should benefit from a gradual pick up in bank lending amid stepped-up efforts by the government to address the state-run banks' capital shortage.Fitch Ratings' Global Economic Outlook
The key risks to its forecast lies in poor access to education and stagnant private investments which continue to ail the economy, the ratings agency said. This could constrain productivity and overall investment growth, it added.
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