The World Bank has projected that India’s economic growth is steadying up and it is bound to increase in the next two years. It has estimated a GDP growth of 7.3% for the 2018-19 fiscal year and 7.5% for the next two fiscal years. The report by the global lender noted that consumption remains the main driver of economic growth in India.
According to the report, India’s economy has recovered from the short-term slowdown caused by factors like demonetisation and the Goods and Services Tax (GST). For the fiscal year 2017-18, India’s GDP growth stood at 6.7% with significant growth acceleration in the later months. Though the country is in the growth phase, the report noted that certain factors like domestic risks and an adverse external environment may affect the country’s growth.
The latest report by the World Bank on South Asia stated, “Prompted by the adoption of the ‘Goods and Services Tax’ (GST) and the recapitalisation of banks, growth in India is firming up and it is projected to accelerate further.”
The report noted that private spending and export growth are two of the main factors driving growth in the country. Consumption has remained the major factor with 7% growth in the second half of the fiscal year.
In the previous fiscal year, a major turnaround was witnessed in the manufacturing sector with 8.8% growth in the second half compared to just 2.7% growth in the first half. In the agriculture sector and services sector, growth was steady at 7.7%. Gross fixed capital formation increased to 11.7% in the second half of the fiscal year compared to 3.4% in the first half.
The World Bank also noted that India has continued to face many external risks that could severely affect the country’s economic growth. Some of the challenges include increasing oil prices, depreciating exchange rate, and increasing import demand. Despite these challenges, fiscal consolidation is expected to begin in the fiscal year 2018-19.
Source: Financial Times