The economic growth of India for FY 2018-19 has been estimated at 7.3% by the Asian Development Bank. The projected growth for the following financial year, i.e. 2019-20 has been pegged at 7.6% thanks to enhanced productivity following the implementation of the Goods and Services Tax. According to the Asian Development Bank, investment is expected to revive thanks to reforms in the banking sector.
During FY 2017-18, the growth of the Indian economy was recorded at 6.6%. The adverse effects of demonetisation and the implementation of the Goods and Services Tax were the reasons for the subdued growth.
The Asian Development Bank’s projected growth rate of 7.3% for FY 2018-19 was the same as that forecast by rating agency Fitch. However, it was slightly lower than the Reserve Bank of India’s prediction of 7.4%.
The Asian Development Bank, based out of Manila, in its Asian Development Outlook, stated that there will be an increase in the economic growth rate as productivity is set to increase when businesses get used to the new tax structure. Moreover, corporate deleveraging and banking reform are expected to combine and reverse the downtrend in investment.
According to the report, growth is expected to rise to 7.3% this financial year thanks to enhanced rural consumption in addition to a decent upstick in private investment as well as lower drag from net exports. Growth is forecast to rise further to 7.6% in a year’s time as the banking system will get stronger and private investment gets a boost from corporate deleveraging.
The Asian Development Outlook stated that the potential for policy stimulus will be limited. Inflation was predicted to average at 4.6% in FY 2018-19, increasing to 5% in FY 2019-20 as global commodity prices continue to firm and domestic demand gets stronger.
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