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India's GDP to grow 7.5% in next two years: World-Bank

Aakanksha Raghuvanshi


India

09 Jan 2019: India's GDP to grow 7.5% in next two years: World-Bank

India's GDP is expected to grow at 7.3% in the fiscal year 2018-19, and 7.5% in the following two years, the World Bank has forecast, attributing it to an upswing in consumption and investment.

It said India will continue to be the fastest growing major economy in the world.

China's economic growth is projected to slow down to 6.2% each in 2019 and 2020.

Study: India leaves China behind in World Bank's economic growth forecast

The World Bank released the data in the January 2019 Global Economic Prospects report yesterday.

In 2018, the Chinese economy is estimated to have grown by 6.5% as against India's 7.3%.

In 2017, China with 6.9% growth was marginally ahead of India's 6.7%, mainly because of the slowdown in the Indian economy due to demonetization and implementation of the Goods and Services Tax (GST).

Growth rate: India is still the fastest growing major economy: Ayhan Kose

"India's growth outlook is still robust. India is still the fastest growing major economy," World Bank Prospects Group Director Ayhan Kose said.

"With investments picking up and consumption remaining strong, we expect India to grow 7.3% in the fiscal year 2018-2019, an average 7.5% in 2019 and 2020. India registered quite a bit of pick up in doing the business ranking," Kose said.

Factors: GST harmonization, bank recapitalization benefits take effect strengthening domestic demand

Kose said that in India, there is "growth momentum."

In India, the growth has accelerated, driven by an upswing in consumption, and investment growth has firmed as the effects of temporary factors wane, the World Bank said in its latest report.

Domestic demand has strengthened as the benefits of structural reforms such as the GST harmonization and bank recapitalization take effect.

Fact: Consumption remained major contributor to growth in India: World Bank

"India's growth accelerated to an estimated 7.3% in FY-2018/19 (April to March) as economic activity continued to recover with strong domestic demand. While investment continued to strengthen amid the GST harmonization, consumption remained the major contributor to growth," the World Bank said.

Inflation: Inflation expected to rise above RBI's target range of 2-6%

According to the report, private consumption is projected to remain robust and investment growth is expected to continue as the benefits of recent policy reforms begin to materialize and credit rebounds.

Strong domestic demand is envisioned to widen the current account deficit to 2.6% of GDP next year.

Inflation is projected to rise somewhat above the midpoint of the RBI's target range of 2-6%.

Analysis: 'Growth numbers suggest India's economy remains robust despite temporary setbacks'

The inflation will rise mainly owing to energy and food prices, the bank said.

It said in India, the recent introduction of the GST and steps toward demonetization are expected to encourage a shift from the informal to the formal sector.

"India's recent growth numbers suggest that the economy remains robust despite temporary setbacks (due top demonetization and GST)," Kose said.

Fact: Estimate: India's potential growth rate is expected to remain 7%

The World Bank's estimate suggests that India's potential growth rate is around 7%, and is expected to remain around 7%, Kose said. "The fact is that Indian economy is being able to deliver growth slightly above its potential is a very good sign," he added.

Comment: The World Bank official however refrained from commenting on Modi

Refraining from commenting on the economic performance of the Prime Minister Narendra Modi Government that too in an election year, the World Bank official said growth performance of India as compared to other emerging markets has been quite impressive.

"India's growth performance has been quite impressive. Year after year it has delivered strong numbers around its potential growth," Kose said.