World Bank expects India's GDP growth at 7.3 percent for 2019-20

Gladys Abbott
March 18, 2018

In its Global Economic Outlook report, the US-based agency forecast Indian economy to clock a growth rate of 6.5 per cent this fiscal, a tad lower than official estimates by the Central Statistics Office (CSO) of 6.6 per cent.

He said the bank planned to lend $20 billion to $25 billion to India in the next five years, mainly for investment in infrastructure, human resources and natural resources management, to support inclusive economic growth.

The Economic Survey tabled in Parliament has projected a growth rate of 7 to 7.5 percent in the 2018-19 financial year.

"The Indian economy is set to revert to its trend growth rate of 7.5 per cent in the coming years as it bottoms out from the impact of the Goods and Services Tax and demonetisation", said the World Bank in its India Development Update.

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.

Furthermore, World Bank report says that it can take time for the economy to get adjusted with a new tax system, however, it is possible that there will be numerous benefits in the long run.

India's trade deficit hit a 35 month high, at $14 billion as exports declined, for the first time in 14 months by 1.12 per cent in October 2017, to $23.1 billion. India needs to durably recover its two lagging engines of growth - private investments and exports - while maintaining its hard-won macroeconomic stability.

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"Many are attributing this short term down turn as a negative fallout from the reforms - Demonetization and Goods and Service Tax (GST)". To sustain its growth path, India will need to keep a close eye on several factors to make the country more resilient to shocks: the changing landscape of open trade, reforms in the banking sector, strengthening financial institutions, and regulatory supervision of the financial sector.

"This will require continued impetus for structural reforms".

"It would be hard to find another country with such a growth promise", said Poonam Gupta, Lead Economist and the report's main author.

"In addition, reforms to land, labour and financial markets are needed to assure the continued competitive supply and use of key production inputs, such as labour, land, finance, and skills", it added. "Implementation of the new Insolvency and Bankruptcy Code is an important step towards improving credit behaviour". 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.

On the flip side, it said oil prices pose less of a risk for the Indian economy, the expected normalisation of monetary policy by the U.S. and the other advanced economies are likely to tighten financing conditions.

The ASSOCHAM-Deloitte study further asserted that Government initiatives have played a big role in improving ease of doing business ranking from 130 in 2016 to current rank of 100, yet a lot of work remains to be done.

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