India will grow at 7.2 percent this year and 7.7 percent in 2018, Finance Minister Arun Jaitley said on Saturday, striking a bullish note about the economy’s ability to quickly gather pace in the coming months. However, he cautioned that emerging markets face new challenges from growing protectionism and geopolitical tension.

“Indian economy is expected to grow at 7.2 percent in 2017 and at the rate of 7.7 percent in 2018,” Jaitley said that at the second annual meeting of the New Development Bank (NDB), popularly called the BRICS Bank, in New Delhi.

Jaitley also said India would require USD 646 billion in next five years for modernising its infrastructure—from highways to urban infrastructure.

“India has a huge unmet need for investment in infrastructure, estimated at Rs 43 lakh crore (about USD 646 billion) over the next five years. Out of this Rs 43 lakh crore, 70 percent of the amount will be required in the sectors such as power, roads and urban infrastructure,” Jaitley said.

The finance minister’s projections ran counter to many analysts who fear that demonetisation’s effects on spending and investment will fester for a few quarters, hurting the broader economy.

Government data released in February projected that India’s gross domestic product (GDP) will likely grow at 7.1 percent in 2016-17, 0.8 percentage points slower than the previous year’s 7.9 percent expansion, but still faster than what many analysts had forecast.

Analysts had cautioned that the sudden move to outlaw Rs 500 and Rs 1000 currency notes in November have hurt household spending on aspirational and essential products that have been the edifice of the India growth story

Jaitley said emerging market economies (EMEs) face newer challenges in the form of inward looking policies of protectionism of some economies, global financial conditions, policies of the United States and increased geopolitical tension.

He said India has sought USD 2 billion loans for various projects from the NDB, which is set up by the emerging nations India, China, Brazil, Russia and South Africa.

Funding needs for building infrastructure in India and other emerging nations offers “enormous opportunity to an institution like New Development Bank (NDB), whose core mandate is sustainable infrastructure development,” Jaitley said.

From overstretched airports to heavily congested roads, and strained capacity at ports, India’s creaky infrastructure is in striking contrast to the image of a country that is aspiring to be a global economic superpower.

India has proposed projects worth USD 2 billion to be funded by NDB, Jaitley said.

NDB was set up in 2015 by the BRICS nations - Brazil, Russia, India, China and South Africa. These five countries are the shareholders of the NBD which is headquartered in Shanghai, China.

"We shall work with the NDB to develop a strong shelf of projects in specific areas such as smart cities, renewable energy, urban transport, including metro railways, clean coal technology, solid waste management and urban water supply," Jaitley said.

NBD President KV Kamath said that the NBD will increase the pace of lending to its member countries facing massive infrastructure deficit.

"During 2017, NDB plans to present to the board 15 projects of around USD 2.5 billion -3 billion. We will increase our speed of giving sovereign guarantee loans. We will innovate in terms of funding and lending," Kamath said.

NBD has already approved seven loans and in addition, has raised money from the market. Setting up of an Africa Regional Centre is also under active consideration.

Jaitley further said that NDB has come up amid huge expectations in a difficult time for the global economy.

"Finally some silver linings are emerging. After a sluggish performance in 2015 and 2016, global growth appears to be recovering, and is projected at 3.4 percent in 2017 and 3.6 percent in 2018," he said, adding the future remains uncertain due to stagnant demand, high debt levels and non-performing loans.

Jaitley said growth in emerging and developing countries is picking up and news from economies of BRICS countries is “encouraging”. “I hope that NDB will emerge as a development bank and help in funding of emerging economies,” Jaitley added.