The slowing Indian economy could take up to 24 months to recover, as it requires the impact of several domestic and geopolitical factors to be undone, Deloitte India chief PR Ramesh told Business Standard.

India’s GDP growth rate fell to 5.7% for the first quarter of 2017-’18, and several ratings agencies and global organisations have cut their economic growth forecasts for India.

Demonetisation and the implementation of the Goods and Services Tax have resulted in a setback, and the banking sector continues to struggle with bad loans, Ramesh said in the interview published on Monday.

There have been global factors as well behind the slowdown, including the impact of the Donald Trump administration in the United States on the Indian services sector, he said. “All of this to be undone in a way will take no less than 12 months but it may stretch closer to 24 months,” he said.

The clean-up in balance sheets of Indian banks is not complete, and a “sense of despair” looms as lenders may have to take large haircuts because of insolvency proceedings against several defaulting companies, Ramesh said. A bank is said to take a “haircut” when it allows a defaulter to systematically get away with paying much lesser than it owes, so that the bank’s balance sheets can look better.

Ramesh said the economy is still heavily dependent on small and medium businesses, which have been hit most by demonetisation and the rollout of the GST. “If you see all these factors,” said the Deloitte India chief, “I would rather err on the conservative side – it will take 24 months – as I do not want to be clouded by what is happening in the capital market space.”