In January, the 2016 World Economic Situation and Prospect report had said that India will be the world's fastest growing large economy at 7.3 per cent in 2016, improving further to 7.5 per cent in the following year.
India's economy, which accounts for over 70 per cent of South Asia's GDP, had grown by about 7.2 per cent in 2015.
The report noted that despite the protracted instabilities and general weakness of the global economy, South Asia's economic outlook remains favourable, with most countries benefiting from low oil prices.
Regional GDP growth is expected to accelerate from 6.1 per cent in 2015 to 6.6 this year and 6.8 per cent in 2017, owing to robust private consumption, strengthening investment demand and gradual progress on domestic policy reforms.
Inflation in South Asia is projected to remain relatively tame, reflecting subdued commodity prices and lower pressures from supply-side bottlenecks. “This has increased monetary policy space, with prospects for further easing in some economies, including India,” it said.
The report, however, said the favourable outlook for South Asia notwithstanding, economies in the region confront several domestic downside risks, including setbacks in reform agendas and political instabilities. “Structural issues like energy shortages, low participation of women in labour force and infrastructure gaps remain major regional challenges,” it said.