India to grow 7.5% next year on higher infrastructure spending: UN

NEW DELHI: The Indian economy will grow 7.5 per cent next year by virtue of consumption revival and higher infrastructure spending, says a report by the UN Economic and Social Commission for Asia and the Pacific ( ESCAP).

For 2017, India's economic growth is projected stable at 7.1 per cent before catapulting to 7.5 per cent going into the next year, the regional development arm of the the United Nations said.

This forecast is "underpinned by higher private and public consumption and increased infrastructure spending," the report said.

The International Monetary Fund last month projected the India's growth at 7.2 per cent in the fiscal 2017-18 and at 7.7 per cent for the next financial year.

While, the Manila-headquartered Asian Development Bank sees the growth jumping to 7.4 per cent in 2017-18 and 7.6 per cent in the next.

Even at this rate, India will continue to clock a better growth than China, which is expected to grow at around 6.5 per cent in 2017.

"Meanwhile, inflation is projected to reach 5.3-5.5 per cent in 2017 and 2018, which is somewhat above the official target of 4.5-5 per cent," the ESCAP said.

A heightened financial sector risk emanates from concentration of huge pile of soar assets sitting on the books of public sector banks, it added.

These banks' gross non-performing assets as percentage of gross advances hit almost 12 per cent in 2016.

"This points to the need for bank recapitalisation."

On the demonetisation drive taken by government during November-December last calender, the UN report said the impact would be transient on the economy.

However, a slower-than-expected recovery would particularly diminish the outlook for cash-intensive sectors and supply chains for agricultural products.

In the medium-term, India will also benefit from recent reforms measures aimed at declogging supply side bottlenecks, it added.

Implementation of good and services tax (GST), amendment of a bankruptcy law and opening up of pharmaceuticals, defence and civil aviation sectors will help India in its economic growth, the report said.

On the trends in the Asia-Pacific region, the UN ESCAP has found growth in the region moderating in recent years compared to its historical trend and a rebound in 2010.

"The region's export-oriented economic growth strategy is under pressure amid prolonged weakness in external demand and global trade," the report said.

"China is both a transmitter and a source of the current economic slowdown, given its role as a hub in global value chains and it rebalanced towards consumption and services," it said.

Although, the region's growth is commendable despite a modest recent past, given a struggling global economy, it added.