Economy to grow 6.5% in 2016 on better macro conditions

The Indian economy is likely to grow around 6.5 per cent in 2016 as macroeconomic conditions seem to be improving on the back of lower crude prices and easing inflation, says a McKinsey & Company report.

According to the global 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 per cent," the report said.

Falling oil prices weigh heavily on growth prospects for commodities-dependent Brazil and Russia, while countries like China and India are benefiting from easing inflationary pressures, it added.

"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.

The Consumer Price Index-based inflation rose to 5.11 per cent in January, from 4.28 per cent in December.

Food inflation in January was 6.13 per cent, according to official data. The price of the Indian basket of crude oil on May 26, 2014, the day the Narendra Modi-led government was sworn in, was  $108.05 per barrel.

It had fallen by around 60 per cent to $43.36 per barrel by January 14, 2015.

"Although the net impact of the lower prices will differ by country, a very rough estimate of the potential consumer savings is nearly  $450 billion, which represents a considerable transfer of wealth from producing to consuming countries," the report added.

Meanwhile, "geopolitical instability" was cited as the leading risk to global growth in McKinsey's global survey of nearly 1,700 business leaders at the end of 2014.

Other significant "risks" are the conflict between Russia and Ukraine; China's downshifting economic pace; Greece's unresolved status in the eurozone among others.