India’s economy is growing at the fastest pace of all the world’s major economic powers. It’s currency continues to gain value, and Moody’s recently raised its credit outlook. The prime minister has instituted reforms to boost employment and business, all while foreign debt is down.
The country’s brisk growth continues even during a shaky time in the global economy and as other emerging nations are struggling against the strength of the U.S. dollar, CNN Money notes. Analysts say India’s fortunes haven’t yet peaked, but how long can they growth continue?
Signs of a booming economy
With an economy that’s flourishing at a pace faster than that of China, and most of the world’s other major economies, India is expected to surpass Russia this year in economic might. International Monetary Fund analysts believe India’s economy will match that of Brazil by 2016, CNN Money reports.
India’s currency, the rupee, continues to gain value against the dollar as the currencies of economic peers South Africa, Turkey and Brazil shrink. And, the raising of the credit rating by Moody’s also signals robust economic conditions.
Reasons behind the fast growth
A number of factors are behind the upsurge in India’s economy. As a country that imports a significant amount of oil, India is seeing both businesses and consumers benefit from falling prices.
In addition, new Prime Minister Narendra Modi has begun supporting the business climate and creating jobs with a number of reform measures. Meanwhile, Reserve Bank of India Governor Raghuram Rajan is working to shrink foreign debt. Coupled with a base of young, skilled workers, those selling points of India’s economic situation are attracting investors.
Can India’s meteoric growth last?
The IMF recently projected a patchy recovery in the global economy with growth overall staying nearly flat at 3.5 percent in 2015 and increasing slightly in 2016, the Times of India reports. However, as one of the two nations — along with the United States — expected to grow at the fastest pace among major economic powers, India may see growth of about 7.5 percent in 2015 and 2016, up slightly from 7.2 percent in 2014.
The IMF projects India’s growth over the next two years to be largely due to the recently implemented policy reforms along with falling oil prices and increased investment, the Times of India notes.
Falling oil prices may boost advanced economies more
Beyond 2016, India could see a decrease in its growth rates also attributable to falling oil prices. The IMF projects that some of the more advanced economies, including Japan and the Euro nations, may experience accelerated growth because they typically pass on savings from lower fuel prices to consumers.
In emerging and developing nations such as India, governments have used higher taxes to restrict some of the gains from lower oil prices, which could result in slower growth.
A cause for concern?
Although the IMF predicts continued economic growth for India over the next two years, the growth is slow, at just 0.3%. The agency advises the Indian government to forge ahead with improvements to bottlenecks in infrastructure and continued competitiveness in labor, education and other markets.
The World Bank, in contrast, takes the optimistic view that India’s economy will continue to grow at its current pace of around 7 percent annually at least through 2017, The Economic Times reports. With a continued focus by the Indian government on cutting red tape and building infrastructure, some analysts predict that India’s string of favorable economic fortunes could last another 20 years.