The Indian economy is likely to recover gradually to 7.1 per cent in 2018-19 financial year as GST related disruptions have smoothened and consumption levels have improved, says a report.

According to a report by Kotak Economic Research, gradual recovery is underway and the country has started to recuperate from the cyclical and structural bottlenecks witnessed over the past two years. “We expect the economy to recover gradually to 7.1 per cent in FY2019 as GST related disruptions smoothen and as consumption improves amid stable wages and expected payouts from states’ implementation of 7th Central Pay Commission,” Kotak Economic Research said in a note. Moreover, improving global growth prospects are further expected to remain supportive of the growth.

According to the Central Statistics Office’s second advanced estimate, the economy would grow at 6.6 per cent in the current fiscal ending March 31 compared to 7.1 per cent in 2016–17. The growth rose to a five-quarter high of 7.2 per cent in the October–December period. “While the ongoing gradual improvement in private investment continues to provide hope of a revival in the capex cycle, the spare capacity in the economy along with a slow resolution of twin balance sheet problems are expected to continue to constrain growth in FY2019,” it added.

On the Reserve Bank’s policy stance, the report the Central Bank is expected to maintain a status quo through the first half of this calender year. “In the backdrop of a gradual recovery, we expect RBI to maintain status quo at least through 1HCY18 while closely assessing the upcoming inflation prints,” it said.

In its 6th and the last bi-monthly monetary policy review of the current fiscal, 2017-18, RBI last month kept interest rates unchanged for the third time in a row saying that higher government spending would accelerate inflation, and warned of risks from wider fiscal deficit.

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