World Bank sees growth at 7.3% next fiscal

Ivan Schwartz
March 18, 2018

Fitch said the Budget for 2018-19 fiscal, beginning April, envisages a slower pace of fiscal consolidation and, therefore, should support the near-term growth outlook.

India's growth has been credible over the long run with growth averaging at 7 percent in the last decade, it said. This is reflected in increasing labor productivity and total factor productivity. The economy grew 7.1 per cent in 2016-17.

The Update centers around an assessment of what it will take for India to return to growth rates of 8 percent and higher on a sustained basis.

The Indian economy regained its momentum in the December quarter, recovering from disruptions caused by demonetisation and implementation of the goods and services tax (GST), to expand at 7.2%, the fastest in five quarters. Economic activity has begun to stabilize since August 2017.

"Many are attributing this short term down turn as a negative fallout from the reforms - Demonetization and Goods and Service Tax (GST)". It appreciated the impact of GST on formalization of the economy and for making economic growth sustainable. "India's growth is far more diversified through investment, private consumption and exports", said Junaid Ahmad, World Bank Country Director in India while talking to reporters here.

"This will require continued impetus for structural reforms", Ms. Gupta added. Private investment in India is constrained by several factors including issues related to past leverages, credit availability, market demand, and policy uncertainty. These include the poor state of private sector investments which need to be enhanced through measures "that assure a favourable investment climate while reducing policy uncertainty".

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Services will continue to remain the main driver of economic growth, it said. "Implementation of the new Insolvency and Bankruptcy Code is an important step towards improving credit behaviour".

Referring to the slowdown in bank credit following a surge in bad loans in banks, estimated at almost $150 billion, the World Bank suggested consolidation of state banks and more space for private banks.

Exports: Export growth rate remains well below the levels registered during the boom years of 2004-2008.

What does India need to do to achieve 8 per cent growth? The scarcity of resources puts India at a disadvantage, which is why, the World Bank said, the country should use the resources available more efficiently within every sector, and allocate them more competently. India's ranking has already improved form 130 in 2017 to 100 in 2018 on the index.

The report says that oil prices could impact the Indian economy as India is increasingly integrated with the global economy. Leveraging the global recovery will be key for India to elevate its growth rates. The minimum support price scheme for agricultural products and increased customs duties on certain products (such as electronics, textiles and auto parts) will boost prices against a backdrop of accelerating growth.

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