India’s economic growth is expected to rebound to 7.3 % this fiscal and further to 7.6 % in 2019-20 with increased productivity post GST and investment revival due to banking reform, the Asian Development Bank (ADB) said today.
The economy grew 6.6 % in the last fiscal as it battled the lingering effects of demonetisation in 2016, businesses adjusting to Goods and Services Tax (GST) in 2017, and a subdued agriculture.
The ADB’s growth projection of 7.3 % this fiscal is in line with that of rating agency Fitch, but a tad lower than RBI’s forecast of 7.4 %.
“In sum, growth is forecast to pick up to 7.3 % in FY2018 on improved rural consumption, a modest uptick in private investment, and less drag from net exports. Urban consumption growth will remain stable, and impetus from public investment modest,” it said.
Growth is expected to pick up further to 7.6 % in FY2019 as efforts are on to strengthen the banking system
“Also set to catalyse growth are benefits from the GST as it mitigates geographic fragmentation and adds revenue to the exchequer, as well as further progress on fiscal consolidation and reform to promote FDI,” it said.
The Asian Development Outlook (ADO) said the prospects for policy stimulus remain limited and there is risk of tight interest rate regime.
“The deferment of fiscal consolidation, upside risks to inflation, and expected hikes in US interest rates in 2018 squeeze maneuvering room for policy rate cuts to stimulate growth. At the same time, the odds of a rate hike are low with the central bank indicating tolerance for slightly higher inflation and recognition of the need to nurture recovery. Consequently, the status quo is likely to hold in FY2018, albeit with some risk of monetary tightening,” it said.
It projected inflation to average 4.6 % in FY2018 (2018-19), rising to 5.0 % in FY2019 with further firming of global commodity prices and strengthening of domestic demand.
