Rajiv Kumar, the vice chairman of Niti Aayog (National Institution for Transforming India), has said that the economic slowdown looming over India for the last three years has bottomed out. According to him, India’s GDP growth will be around 7.1% for the fiscal year 2017-18 and 7.5% for the fiscal year 2018-19. He is also optimistic that economic growth will improve in the upcoming years.
Despite good performance in the agricultural industry, India’s GDP growth slowed down to 7.1% for the fiscal year 2016-17 compared to 8.0% for the fiscal year 2015-16. There was a serious debate across the country when economic growth for the first quarter of the current fiscal year slowed down to 5.7%, a three-year low.
Fiscal year 2016-17 was the time during which 87% of India’s currency was demonetised. According to Kumar, the slowdown started in the year 2013 when banks lent money to various undeserving projects.
In an interview to the Press Trust of India, Kumar said that the high economic growth between the years 2007 and 2013 was due to a huge increase in private debt over which the banks had no control. During this period, bank loans were offered to the most undeserving projects and on completely false assumptions.
Kumar’s views on India’s GDP growth are in line with major financial agencies such as the International Monetary Fund (IMF) and World Bank. Though IMF has lowered India’s growth projections for the current fiscal year, it remains positive that Indian economic growth is right on track. In its report, IMF mentioned that the slowdown caused by GST and demonetisation is only temporary and India will revive soon.
Demonetisation and GST reforms implemented across the country caused a slowdown in the manufacturing sector and general consumption. Most financial agencies such as Morgan Stanley, Fitch, and World Bank are also in agreement that the Indian economy is all set for revival right from the second half of the fiscal year 2017-18.