The World Bank expects India’s economy to expand at 7.2 per cent this fiscal, but said that the note ban temporarily disrupted growth last fiscal, which slowed to an estimated 6.8%.
“India’s economy was slowing down in early 2016-17, until the favorable monsoon started lifting the economy, but the recovery was temporarily disrupted by the government’s ‘demonetisation’ initiative,” it said in its India Development Update released on Monday.
The report comes ahead of the release of provisional estimates of national income for 2016-17 by the Central Statistics Office (CSO) on May 31. The CSO, in its advance estimates, had pegged GDP growth at 7.1% in 2016-17.
The World Bank had in January scaled down India’s growth forecast to 7% for 2016-17 and had estimated growth to rebound in 2017-18 to 7.6%.
However, it expects the economy to recover gradually and growth to increase to 7.7% in 2019-2020.
“India remains the fastest growing economy in the world and it will get a big boost from its approach to the goods and services tax,” said Junaid Ahmad, World Bank Country Director in India.According to the report, reforms such as the insolvency code and measures to deal with bad loans of public sector banks, including promulgation of the new ordinance will also be crucial to enhance growth.
It expects inflation and external conditions to remain stable this fiscal. The World Bank highlighted issues of weak private investments, low credit growth and rising anti-trade rhetoric globally as challenges to growth.
The report also stressed that job creation, especially for women, should be the next focus for the government after GST, which can boost growth into double digits.
“India has only created jobs equivalent to 0.9% of the adult population between 2005 and 2012 and most of these regular wage jobs created went to men,” it said.
India’s potential GDP growth can rise by 1% point if half the gap in female labour force participation rate (LFPR) with Bangladesh or Indonesia is closed, according to an assessment by the World Bank.
Six months after the demonetisation of high-value currency notes, the World Bank termed it “a gargantuan and unprecedented” exercise.
While it helped curb black money, the report said that the challenge will now be to sustain compliance by tax-payers as well as the shift to digital transactions from cash payments.
- Indian Express
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