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The World Bank on Wednesday said India’s growth is likely to accelerate from 6.7 per cent this fiscal to 7.3 per cent in 2018-19.
The economy could expand by 7.5 per cent in 2019-20 but will require a sustained revival in private investments and exports to reach eight per cent growth.
“The Indian economy is set to revert to its trend growth rate of 7.5 per cent in the coming years as it bottoms out from the impact of the Goods and Services Tax and demonetisation,” said the World Bank in its India Development Update.
The forecast by the Washington DC-based multilateral agency, which is in line with its earlier projection in January, is however, a tad more optimistic than the government’s official estimates, which has pegged GDP growth in 2017-18 at 6.6 per cent.
For 2018-19, the Economic Survey has forecast growth between 7 per cent and 7.5 per cent.
Further, to reach middle class status, the World Bank has said that India would need to grow at over eight per cent for 30 years.
The report has also underlined priority areas for reform by India including accelerating the investment rate, reviving bank credit to support growth and more competitiveness to strengthen exports.
The report has also noted that while oil prices pose less of a risk for the economy, the expected normalisation of the monetary policy by the US and other advanced economies are likely to tighten financing conditions.
“Oil prices have increased in the last few weeks. But we expect oil prices to come down from the early $ 60 a barrel to the late $50 a barrel,” said Poonam Gupta, Lead Economist, World Bank and the main author of the report.
Doing Business Index
The report also said that India has the potential to further improve its ranking in the Doing Business Index of the World Bank. India’s ranking has already improved form 130 in 2017 to 100 in 2018 on the index.
“India appears to be doing well on the quality of regulations but not equally well in areas that capture the implementation of laws,” it noted.
Goods and Services Tax
While terming the Goods and Services Tax (GST) as a “historic reform”, the report, however, said that tax rates in India’s GST system are among the highest in the world. It has also called for lower compliance burden by minimising the number of rates and exemptions, simplifying laws and risk based audit programmes and has also recommended a nuanced communications campaign.
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