Moving forward, the ADO expects growth to accelerate through increased consumption, as more new bank notes are put in circulation, and as planned salary and pension hike for state employees are implemented. The public sector will remain the main driver of investment as banks continue to wind down balance sheets constrained by high levels of stressed assets. Exports are forecast to grow by 6% in the coming year.

Inflation, meanwhile, is expected to accelerate to 5.2% in FY2017 and 5.4% in FY2018 as the global economy recovers and commodity prices rebound.

The assessment notes risks from higher oil prices as India imports nearly 80% of its fossil fuel needs. A rapid increase in the price of oil could undermine the country's fiscal position, stoke inflation, and swell the current account deficit. The report estimates that a $1 increase in oil prices raises the import bill by nearly $2 billion. In FY2016, rising oil prices resulted in a 37.6% increase in India's import bill. To mitigate India's vulnerability to oil price swings, the government has proposed reducing dependence on imported oil by 10% over the next 5 years through more efficient domestic production and increased private investment into the sector.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB is celebrating 50 years of development partnership in the region. It is owned by 67 members—48 from the region.

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