NEW DELHI:With sharp fall in global crude oil prices and easing inflation, the Indian economy is likely to grow around 6.5% in 2016 as macroeconomic conditions seem to be improving, says McKinsey & Company, a global consulting firm in its report.
According to the consulting firm, the Indian economy has experienced “broad improvements” in the macroeconomic conditions and especially the low energy prices have eased inflationary pressures and reduced import bills. “Conditions in India appear to be improving and growth through 2016 is forecast at around 6.5%,” it said.
India, which is the fourth largest consumer of oil, is a big beneficiary of falling oil prices. The reduced prices will not only lower the import bill but also help save foreign exchange. As per rough estimates, a $10 fall in crude could reduce the current account deficit by approximately 0.5% of GDP and the fiscal deficit by around 0.1% of GDP.
India’s trade deficit hit a 11-month low in January to $8.3 billion as its merchandise exports as well as imports contracted for the second month in a row on the back of easing global crude oil prices.
Falling oil prices weigh heavily on growth prospects Brazil and Russia, while countries like China and India are benefiting from easing inflationary pressures., it said.
“China and India have both experienced broad improvements in macroeconomic conditions, especially as low energy prices eased inflationary pressures and import bills, the report said adding that while financial markets gained in China it remained “volatile” in India.