The United Nations in its World Economic Situation and Prospects (WESP) 2017 Report, pegged India’s growth rate at 7.7 per cent in 2017 and 7.6 per cent in 2018 on expectation of strong private consumption.
The UN report has not taken into consideration the impact of demonetisation on the economy.
The projection comes soon after the International Monetary Fund in its recent update to the World Economic Outlook cut India’s growth projection to 6.6 per cent this fiscal and 7.2 per cent in 2017-18. It expects the economy to clock 7.7 per cent growth in 2018-19.
Highlights of the Report:
India has positioned itself as one of the most dynamic emerging economies. Investment demand is expected to pick up slightly, supported by monetary easing, government efforts towards infrastructure investments and public-private partnerships, and domestic reforms.
India is expected to remain the fastest growing large developing economy, as it would benefit from strong private consumption and the gradual introduction of significant domestic reforms.
The proposed introduction of the Goods and Services Tax as a reform that would “constitute a major change by establishing a new uniform tax rate. In the medium term, GST would also promote investment through lower transaction and logistics costs and efficiency gains. Importantly, an effective GST implementation also requires adequate capacity building of the tax administration.
The report however, warned that low capacity utilisation and stressed balance sheets of banks and businesses will prevent a strong investment revival in the short term.
While expecting further monetary easing, it also noted that credit growth remains below trend in several countries, especially in industrial and infrastructure sectors in India.
It has also introduced various regulations to reduce banks’ financial exposure and to encourage private participation in the banking sector.