World Bank’s India Economic Update – September 2012 – Where is India’s economy headed

India’s economic growth has slowed to a pace not seen since the beginning of the 2000s. At the same time, the current account deficit has reached a record high. We project growth in the current fiscal year to reach around 6%, a slowdown from the already low 6.5% growth in the previous year. This growth projection is predicated on an improving domestic and external environment, but the risks for a worse outcome are high.

On the domestic front, recently announced measures to reduce subsidies and boost FDI were important to lift sentiment, but investors are waiting for signals on other issues: the reform of direct taxes, the implementation of the long-delayed GST, and passage of the land acquisition and mining bills.

This India Economic Update also looks closely at two important topics:

  • First, India’s Right to Education Act redefined how the goal of providing a high quality of education is to be understood in India. It is perhaps not surprising that the implementation challenges are huge and many-layered and spurred vigorous debates.
  • Second, electricity utilities in many states are facing a financial crisis and will only return to financial health once they and policy makers focus on service delivery, tariffs, efficiency, and profitability.