World Bank projects India's FY19 GDP growth at 7.3 per cent

NEW DELHI: India’s economy is expected to grow 7.3% in the next financial year and accelerate to 7.5% in 2019-20, bottoming out from the impact of demonetisation and GST, the World Bank said even as it highlighted private investments and exports as the two lagging engines of growth. In its biannual publication, India Development Update, the World Bank said it expected Indian economy to clock a growth rate of 6.7% in the current financial year. “India’s long-term growth has become more steady, stable, diversified and resilient,” said Junaid Ahmad, World Bank country director in India.

The report was discussed with chief economic adviser Arvind Subramanian last week. The World Bank, however, observed that a growth of over 8% will require “continued reform and a widening of their scope” aimed at resolving issues related to credit and investment, and enhancing competitiveness of exports.

India’s GDP growth saw a temporary dip in the last two quarters of 2016-17 and the first quarter of 2017-18 due to demonetisation and disruptions surrounding the initial implementation of GST. Economic activity has begun to stabilise since August 2017, it said. India’s economic growth had slipped to a three-year low of 5.7% in April-June quarter of the current fiscal, though it recovered in the subsequent quarters. The economy is expected to grow at 6.6 % in 2017-18, as per the second advanced estimates of the Central Statistics Office, compared to 7.1% in 2016-17. The earlier estimate was 6.5%.


However, unlike Economic Survey, which cited rising oil prices as a risk to economic growth, inflation and current account deficit, World Bank said: “Oil price seem less of a risk for now, unless the outlook changes dramatically”.

Higher private sector investments, revival of bank credit, making exports competitive and leveraging external conditions are the priority areas for reform, according to the report. The share of both Indian goods and services exports in world exports has declined.

The World Bank also emphasised on cleaning up banks’ balance sheets, realising the expected growth and fiscal dividend from GST, and continuing the integration into the global economy as it praised IBC as an important reform.