A UN report, "World Economic Situation and Prospects 2016", points to the fact again that India is the brightest spark in today's gloomy global economic environment. The report projects that we will be the fastest growing large economy in 2016, registering a growth of 7.3 percent. Macroeconomic environment in the country, the report says, has improved notably over the past two years, buoyed by decline in prices of oil, metals and food. It also draws attention to a rise in consumer and investor confidence, despite difficulties faced by the Centre in pushing its wide-ranging reform agenda. This outlook is encouraging, particularly at a time when the global economy is not in the best of health.

The report predicts a modest global growth of around 2.9 percent for 2016, ticking up to around 3.2 percent next year, adding that the developed economies, particularly the US – and not the developing and transition economies – are expected to contribute more to global growth this year. The report also draws attention to improved economic health of the US and the EU, adding that region-wise, however, East and South Asia will remain the world's fastest-growing regions, despite the China slowdown. Some major 'headwinds' – including persistent macroeconomic uncertainties and volatility, low commodity prices and declining trade flows, and rising volatility in exchange rates and capital flows – which will continue to shape the near-term outlook and long-term prospects of the global economy, are also pointed out.

As far as prospects of the Indian economy are concerned, I think a few points of the report deserve special mention. First, in most South Asian economies, including India strong private consumption will continue to be the main driver of growth. Second, the RBI's monetary easing last year has not translated into much decrease in bank lending rates and rise in commercial loan growth. Third, there is a significant risk of deterioration in market confidence if reforms do not continue. Fourth, any adverse shock, such as lower-than-average monsoon rainfall, could have a sizable negative impact on output growth. And, with little scope left for monetary policies further, time has come for fiscal policies to do the heavy-lifting to support growth.

In the background of the above, I think reviving domestic demand, particularly rural demand, should be a high priority for our policy makers. Also, we need to find a way out of high interest rates so that the Indian industry gets access to affordable loans. In addition, reforms must continue, for which the Centre must do its best and the Opposition, on its part, must move beyond obstructionist politics. As far as food prices are concerned, efficient supply-side management can make a big difference. With regards to fiscal policies, I think it is the right time to give a thought how to increase revenues. The decline in oil prices has created some room for fiscal expansion, and we need to make the best of it so that spending on infrastructure, health and education can be increased to boost the growth rate this year and also to pave the way for future growth.

I invite your opinions.