Sounding an optimistic note for the economy after disruptions from note-ban and the Goods and Services Tax, a Deloitte report on Tuesday said India will resume its status as one of the fastest growing economies in 2018.
The report has pegged India’s growth at 6.8-6.9 per cent in 2018, adding that it will be driven by private consumption by both rural and urban areas.
“After a year of disruption in 2017, 2018 is expected to be a year of consolidating the gains from recent reforms,” said the Deloitte in a report titled ‘Voice of Asia’.
The report comes at a time when most official macro economic indicators also seem to point to a recovery. The Central Statistics Office pegged the third quarter GDP growth at 7.2 per cent and also scaled up the growth forecast to 6.6 per cent for 2017-18.
Indicating that this recovery is also continuing into the fourth quarter, the index of industrial production grew by 7.5 per cent in January. Consolidating gains from structural reforms, the Economic Survey has forecast growth between 7 per cent and 7.5 per cent in 2018-19.
The Deloitte report said the economy seems to have recovered from the impact of demonetisation as the currency circulation has returned to pre-demonetisation levels.
Similarly, consumer demand and growth slowed down as a short-term impact of GST, the report said adding that market disruptions now seem to be reversing.
“The spike in GDP growth from 5.7 per cent in the third quarter of 2017 to 6.3 per cent in the fourth quarter suggests that the initially negative impact of GST and demonetisation may be waning,” it added.
But since the economy is largely domestically driven, downside risks to growth will also be domestic in nature, the report said, adding that this could include continuing disruptions from the implementation of the GST
The report also warned that high growth could also lead to a higher inflation. “Major external risks include oil price shocks, tax rate competitiveness, and growing barriers to trade,” it added.
It also said that the bank recapitalisation plan of ₹2.11-lakh crore is expected to increase private investment and create jobs.