World Bank forecasts India GDP growth rate at 7.3% in 2018-19

World Bank forecasts India GDP growth rate at 7.3% in 2018-19

After the shock of demonetisation in late 2016 and the implementation problems involving the Goods and Services Tax (GST) a year ago, the Indian economy has started to recover assisted by recent reforms, and growth should soon revert to 7.5 per cent.

India's growth has been credible over the long run with growth averaging at 7 percent in the last decade, it said.

The Indian economy is expected to grow at 7.3 per cent next financial year and 7.5 per cent in the 2019-20 fiscal year, the World Bank said in its report on Wednesday.

Fitch said it expects the Reserve Bank of India to start raising interest rates next year as growth gains further traction, while inflationary pressures should remain quite high.

For the current financial year ending March 31, the Washington-based multi-lateral funding agency has projected the economy to grow at 6.7 per cent.

The report also said that India has the potential to further improve its ranking in the Doing Business Index of the World Bank.

"The Indian economy is likely to recover from the impact of demonetisation and the GST, and growth should revert slowly to a level consistent with its proximate factors - that is, to about 7.5 per cent a year", the report said.

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

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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)".

"Besides recapitalization, a consolidation of public sector banks, revising their incentive structure to align it more closely with their commercial performance, ensuring a level playing field for private banks, and opening the space for greater competition would be important measures to durably enhance the stability and efficiency of the banking sector", the bank added.

"India's long-term growth has become more steady, stable, diversified and resilient". Between 2010 to date, India's economic growth has averaged at 7.1 per cent, mostly due to the global slowdown post the financial crisis of 2008.

"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.

"This will require continued impetus for structural reforms".

"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. Among the many preconditions for India to reverse this pattern are an infrastructural boost to bring it on par with the world's current manufacturing hubs.

The report says that oil prices could impact the Indian economy as India is increasingly integrated with the global economy.

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