The International Monetary Fund on Wednesday said that India’s economic growth will rebound in the next fiscal, a month after it had slashed the growth estimate for the current financial year to 6.6% from 7.6% post-demonetisation. The IMF has now said the economic growth will rebound to 7.2% next fiscal.

It also said the adoption of the Goods and Services Tax can boost India’s economic growth to over 8%.

“Tailwinds from a favourable monsoon, low oil prices and continued progress in resolving supply-side bottlenecks, as well as robust consumer confidence, will support near-term growth as cash shortages ease,” the IMF said in its Article IV consultations report.

Despite the cash crunch, the measures taken by the government, such as allowing use of old currency notes at fuel stations and agricultural inputs, have helped mitigate the negative impact of demonetisation, the report added. Demonetisation presents “an opportunity to increase” the financial intermediation in the longer term, IMF said.

“It can also support a widening of the tax base, help reduce the fiscal deficit, enhance bank liquidity, and give a fillip to the government’s efforts to promote greater financial inclusion,” the report added.

The report further predicted stronger economic growth from the “larger than expected gains from GST” and the continued low global energy prices will also add to India’s benefits. “The GST should have minimal exemptions, uniform cross-state rates, and as few tax rate tiers as possible,” the report said according to PTI.

The GST will create a single Indian market which can greatly enhance India as an investment destination, the report added. The indirect tax structure will become less complex and the cost of doing business will also decline.