India’s economic growth is expected to rebound to 7.3 percent this fiscal and further to 7.6 percent in 2019-20 with increased productivity post GST and investment revival due to banking reform, the Asian Development Bank (ADB) said on 11 April 2018. The economy grew 6.6 percent in the last fiscal as it battled the lingering effects of demonetisation in 2016, businesses adjusting to Goods and Services Tax (GST) in 2017, and a subdued agriculture.
The ADB’s growth projection of 7.3 percent this fiscal is in line with that of rating agency Fitch, but a tad lower than RBI’s forecast of 7.4 percent. The deferment of fiscal consolidation, upside risks to inflation, and expected hikes in US interest rates in 2018 squeeze maneuvering room for policy rate cuts to stimulate growth. At the same time, the odds of a rate hike are low with the central bank indicating tolerance for slightly higher inflation and recognition of the need to nurture recovery. Consequently, the status quo is likely to hold in FY2018, albeit with some risk of monetary tightening
In its Asian Development Outlook, 2018, Manila-based ADB said the growth will pick up as the new tax regime improves productivity and as banking reform and corporate deleveraging take hold to reverse a downtrend in investment. Growth is expected to pick up further to 7.6 percent in FY2019 as efforts to strengthen the banking system and continued corporate deleveraging are likely to bolster private investment.