Published: Fri, March 16, 2018
Economy | By Melissa Porter

World Bank Projects India's GDP Growth At 7.3 Per Cent For FY19

World Bank Projects India's GDP Growth At 7.3 Per Cent For FY19

The report expects the Indian economy to clock a growth rate of 6.7 per cent in the current fiscal.

The World Bank projected the $2.5 trillion economy could grow at 7.3 percent and 7.5 percent in the next two years, helped by tax reforms and benign global growth. The economy is expected to grow at 6.6 per cent in the current fiscal ending March 31, as per the second advanced estimates of the Central Statistics Office (CSO), compared to 7.1 per cent in 2016-17.

The bank's India Development Update divides India's economic growth history into four segments.

The World Bank attributed the growth to a stabilising economy post demonetisation and the rollout of the Goods and Services Tax (GST).

"The GDP growth is projected to reach 6.7 per cent in 2017-18 and accelerate to 7.3 per cent and 7.5 per cent in 2018-19 and 2019-20, respectively", it said.

"While services will continue to remain the main driver of economic growth, industrial activity is poised to grow, with manufacturing expected to accelerate following the implementation of the GST, and agriculture will likely grow at its long-term average growth rate", it said.

"In the long-run, for higher growth to be sustainable and inclusive, India needs to use land and water, which are increasingly becoming scarce resources, more productivity, make growth more inclusive, and strengthen its public sector to meet the challenges of a fast-growing, globalising and increasingly middle-class economy", Ahmad said.

As regard India, it said the money supply recovered to its pre-demonetisation level in mid-2017 and is now increasing steadily, similar to the previous trend.

The World Bank Report is an endorsement of economic reforms undertaken by the Modi govt and India's growth is expected to have a salutory impact on the global growth scenario as well.

The report refers to the impact of reforms on the Indian economy from composition of deficit, energy subsidy reforms, GST, ease of doing business, FDI liberalisation, infrastructure generation, inflation targeting framework, Insolvency and Bankruptcy Code, to access to financial services and digital payments leading to better governance, and delivery of services and benefits.

The report also states that India will have to address several issues to attain a growth rate of 8 percent in the years to come.

"Going forward, de-risking the private sector may be important, as it may be to ensure an environment of policy certainty", the report added. "Along with the need to apply the correct rate, firms are required to match invoices between their outputs and inputs to be eligible for full input tax credit, which increases compliance costs further", the World Bank report added.

Bank Credit: Reviving bank credit to support growth is important. However, the government's plan of infusing capital into public sector banks could reinvigorate bank credit.

Thus, India has among the highest number of different GST rates in the world, the report said.

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