Economic outlook, analysis and forecasts

India - Economic forecast summary (November 2014)

 

Activity is projected to pick up gradually. Corporate investment is recovering swiftly as business confidence has been boosted by the decline in political uncertainty and the commitment by the government to reduce red tape. Efforts to put large stalled infrastructure projects back on track are also beginning to pay off. Tight fiscal and monetary policies are needed to contain inflation, but will also restrain domestic demand. The current account deficit will increase slightly as domestic demand strengthens but remain sustainable.

Although inflation is falling, monetary policy should not be loosened until inflation expectations adjust downward and the path of disinflation is well-entrenched. The adoption of the proposed flexible inflation-targeting monetary policy framework would help to stabilise expectations around the target. Fiscal consolidation should be pursued, but it is critical to improve its quality. Reviving inclusive growth will require deep structural reforms to better target subsidies, increase further investment in social and physical infrastructure, improve the business environment and modernise labour and tax laws.


Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.

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