HONG KONG- India’s economy shows promise of a “turnaround” following Narendra Modi’s election, while Asian markets will likely ride out the effects of further stimulus tapering by the United States, the Asian Development Bank said Thursday.
The Manila-based lender was bullish on India’s future in a supplement to its 2014 economic outlook for the region saying it expected gross domestic product (GDP) to grow 6.3 percent next year, up from an earlier projection of six percent.
“After winning a decisive parliamentary victory, the new (Modi) government is better positioned than the old to pursue the reform necessary to unlock the economy’s growth potential,” the bank said in its summary.
“Reform to stimulate investment, the timely award of environmental clearances, and measures to control inflation are expected to augment firming exports demand from major industrial economies to boost economic growth,” it added.
Prime Minister Modi swept to power in May on a pro-business platform that generated a tide of hope after years of political stagnation and slowing economic growth.
India’s economy expanded 5.7 percent in the first quarter of the financial year, the best quarterly performance in more than two years.
And a sharp narrowing of its current account deficit — the broadest measure of trade — also boosted investor sentiment.
But despite winning the biggest mandate in 30 years, Modi’s right-wing government has not yet introduced big-ticket reforms that are needed to kickstart growth. Industrial output expanded an unexpectedly slow 3.4 percent in June.
“One of the major threats is that many reforms that those countries are banking on to keep the growth momentum may not be carried out on schedule,” ADB chief economist Wei Shang-Jin said, mentioning India.