India is estimated to grow 6.7 percent: World Bank

In India, growth slowed for the fifth consecutive quarter to 5.7 percent (year-on-year) in the first quarter of FY2017/18

GN Bureau | January 10, 2018


#World Bank   #Growth   #Economy   #GDP  


The growth in South Asia slowed to a still strong 6.5 percent in 2017, in part reflecting businesses’ adjustment in India to the country’s new Goods and Services Tax and to the adverse impacts of natural disasters across the region, said the World Bank’s Global Economic Prospects.

India is estimated to grow 6.7 percent in fiscal year 2017/18, which ends March 31, slightly down from the 7.1 percent of the previous fiscal year. This is due in part to the effects of the introduction of the Goods and Services Tax, but also to protracted balance sheet weaknesses—including corporate debt burdens and nonperforming loans in the banking sector—weighing down private investment.

In neighbouring Pakistan, growth is forecast to tick up to 5.5 percent in FY 2017/18, which ends June 30, with strong activity in construction and services, a recovery in agricultural production, and robust domestic demand supported by strong credit growth and investment projects. However, the current deficit widened to 4.1 percent of GDP, amid weak exports and buoyant imports.

As far as the outlook is concerned, the growth in the region is forecast to accelerate to 6.9 percent in 2018. Consumption is expected to stay strong, exports are anticipated to recover, and investment is on track to revive as a result of policy reforms and infrastructure upgrades.

India is expected to pick up to 7.3 percent growth in FY 2018/19, which begins April 1, and to 7.5 percent in FY 2019/20, supported by strong private consumption and public spending on wage increases and infrastructure investments. Private investment is expected to revive as the private sector adjusts to the Goods and Services Tax and a global trade recovery lifts exports, said the report.

Excluding India, growth in the region is projected to pick up to 5.8 percent in 2018 and to 5.9 percent the following year as domestic demand remains robust and exports recover. Pakistan is expected to accelerate to 5.8 percent in FY 2018/19, which begins July 1. Bangladesh will grow at 6.7 percent in FY 2018/19, benefitting from strong domestic demand and strengthened exports. Sri Lanka is forecast to accelerate to 5 percent in 2018, mainly reflecting strong private consumption and investment growth.

Risks to the outlook are mainly domestic. Setbacks to reform efforts in the corporate and financial sectors, disruptions due to natural disasters, and challenges that weaken domestic demand could subdue growth prospects. Increasing liabilities across the region could also derail fiscal consolidation efforts, with weaker debt sustainability dampening financial market confidence. Externally, an upswing in global financial volatility could slow growth. However, on the upside, stronger-than-expected global growth could result in faster growth than anticipated in the more open economies in the region.

The report went on to say that in India, growth slowed for the fifth consecutive quarter to 5.7 percent (year-on-year) in the first quarter of FY2017/18 (April-June 2017), partly reflecting adjustments by businesses to the prospective introduction of the GST in July 2017.

In addition, protracted balance sheet weaknesses— in particular, a corporate debt overhang and elevated non-performing loans in the banking sector—continued to weigh on already weak private investment. Weak private investment was only partly mitigated by a public infrastructure investment push and a surge in current expenditures after recent public pay hikes.

In the second quarter of FY2017/18 (JulySeptember 2017), the slowdown in economic activity bottomed out by a still weak 6.3 percent (year-on-year) growth. The manufacturing Purchasing Managers’ Index (PMI) and industrial production growth remained broadly expansionary after they temporarily weakened as producers reduced inventories amid uncertainty relating to the implementation of the GST.

The report said that despite a recent uptick, inflation remained within the Reserve Bank of India’s (RBI) target band of 2-6 percent, following a steady decline over the past year to 1.3 percent in July amid weak food prices.

Fiscal consolidation has continued in the central government, but subnational fiscal deficits have risen, partly reflecting debt payments taken over through Ujwal Discom Assurance Yojana (UDAY) and a broader shift in public expenditures from central to state governments, and recent public pay hikes, it added.

Read: World Bank’s Global Economic Prospects South Asia region

 

Comments

 

Other News

How Covid-19 can be a boon to slash tobacco disease burden

 The two-month Covid-19 lockdown has been both a bane and a boon for India’s 27 crore tobacco users. With tobacco not included in the list of essential goods and many states explicitly banning chewing tobacco over concerns of spitting, the sharp drop in availability has forced them to undergo wi

Maharshtra braces to face Cyclone Nisarga

 Even as Mumbai fights challenges posed by COVID-19 on multiple fronts and as the  coronavirus cases continue to rise daily, the city now faces a double whammy with the cyclone ‘Nisarga’ slated to make the landfall in Maharashtra Wednesday. A state-wide alert has been issued for Mumba

Harnessing the demographic capital: how effective are skilling programmes?

Probing data concerning increased job creation and the decline in unemployment has been holding the attention of economists and been subject of discussions in several think tanks in the preceding months. The NITI Aayog reports that 3.53 million new jobs were created between September 2017 and February 2018

It`s time to Unlock now, with economic focus

With Lockdown 4 ending Sunday, the home ministry has issued new guidelines to fight COVID-19 and for phased re-opening of areas outside the Containment Zones. The guidelines, issued based on extensive consultations held with states and UTs, will be effective from June 1 till June 30. The first phase of reo

Small kitchen gardens turn saviours for Gujarat tribal families

When the whole world is fighting COVID-19, food and nutrition security has become a major issue. The pandemic has aggravated the existing food crisis in India, especially in rural and tribal regions. There has been less availability of fresh foods in most parts of the country, and the tribal community has

India will set example of post-Covid-19 economic revival: Modi

India is determined to “set an example” for the rest of the word in the post-pandemic economic revival, prime minister Narendra Modi has said, underling the need to become self-reliant. “There is also a widespread debate on how the economies of various countries, including



Archives

Current Issue

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter